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The Quick Take: March 21, 2018

Stay-The-Course Budget Keeps Nova Scotia in the Black

Daniel Fields
National Forecast

“With the goal of maintaining a surplus position throughout the forecast period, the 2018 Nova Scotia budget kept things pretty simple. Outside of a few minor spending increases, and no new tax announcements, this year’s budget was a stay-the-course affair.”

The 2018 Nova Scotia budget, released on March 20, focused on maintaining a surplus position while providing some small increases in spending. Areas that saw a sprinkling of new cash were the health care and education sectors.

The budget allocated more money to recruiting and retaining doctors as well as expanding pre-primary education and making childcare more accessible.

Despite the new spending announcements, spending growth is expected to remain moderate over the forecast period. According to the budget, spending is slated to grow at an average annual rate of 2.3 per cent between 2018–19 and 2021–22.

The 2018 Nova Scotia budget is based on a real GDP forecast of 1.0 per cent in 2018 and 0.8 per cent in 2019. This is slightly weaker than the Conference Board’s current economic outlook.

Overall, the budget projects revenues to grow by 2.0 per cent between fiscal year 2018–19 and 2021–22 thanks to decent nominal GDP growth of 2.9 per cent over the same period.

We expect that there may be some upside risk to these numbers. Our own forecast includes a stronger outlook for total revenues based on higher equalization payments, the result of strong economic growth in Ontario and the phasing out of equalization payments to that province.

Overall, the government expects to maintain a surplus of $29 million in 2018-19, which is in line with expectations from last year’s budget projection of $36 million.

Despite maintaining surpluses over the forecast period, net debt is expected to grow by $476 million by 2021–22. However, net debt as a share of GDP will fall considerably according to budget estimates, from 34.9 per cent in 2017–18 to 32.1 per cent in 2021–22.

Overall, with solid revenue growth—which has upside risks thanks to higher equalization payments—and a reasonable spending plan, Nova Scotia is on a healthy and sustainable fiscal path going forward.

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