Our Analysis of the British Columbia Budget 2025

Balancing Growth and Deficit Concerns

The province anticipates a deficit of $10.9 billion in fiscal year 2025–26. The deficit is projected to shrink over the following two years, reaching $9.8 billion by fiscal year 2027–28. By then, the government will have added over $140 billion in debt since 2018–19.
The government’s net debt-to-GDP, while increasing, remains modest compared to most other provinces in Canada. However, the trends are becoming more concerning. The province’s total debt is expected to increase by 56 per cent between fiscal year 2024–25 and fiscal year 2027–28. That increase will lead interest costs as a share of revenue to rise from 4.3 per cent to 6.9 per cent over the same period.
The Government of British Columbia anticipates a deficit of $9.1 billion in fiscal year 2024–25, $273 million lower than projected in its fall fiscal update. The upward revision is driven by higher than anticipated corporate tax revenues and investment earnings at the Insurance Corporation of British Columbia.
Budget 2025 reiterated the government’s commitment to limiting public service hiring to core service positions to restrain spending growth.
New spending was limited but concentrated in healthcare and education, with $9.9 billion in additional operating funding over three years for those public services. An additional $15.5 billion in capital funding over that time will also be provided to the healthcare sector to build and upgrade existing facilities.
Total expenses (before contingencies) in fiscal year 2025–26 are projected to increase by 3.2 per cent from the previous fiscal year.
Total revenues are expected to increase by a more modest 1.4 per cent, mainly driven by a reduction in corporate tax revenue due to a one-time settlement payment in the previous fiscal year.
The B.C. government assumes the provincial economy will grow by 1.8 per cent in 2025 and 1.9 per cent in 2026 and 2027, broadly in line with our thinking on B.C.’s outlook.
Like our February provincial economic outlook, the government’s scenario does not include the implementation of U.S. tariffs and Canada’s response but includes lower growth due to increased uncertainty.
However, the government is taking a cautious approach, leaving $4 billion in annual contingencies for emergencies and other unknown costs, including challenges surrounding restrictive U.S. trade policies.
In February, the government showed another sign of caution by cancelling its $1.8 billion grocery rebate to households across British Columbia, citing unpredictability in U.S. policy and the impact it would have on finances.

Key insights

British Columbia is entering a new period of economic uncertainty from a difficult position. Before the pandemic, the B.C. government posted six consecutive annual surpluses. With a promising resource development outlook and a burgeoning tech sector, the province’s fiscal position was among the most favourable in the country. However, that seems like a distant memory. British Columbia’s deficit in 2024–25 is among the largest in Canada. Looking ahead, this trend is unlikely to change, with a steeper deficit planned for 2025–26 and only modest reductions by 2027–28, and interest on its growing debt taking up an ever larger share of revenues.

Released under the shadow of uncertainty cast by the threat of tariffs, British Columbia’s budget presents a conservative approach to the fiscal year ahead. Spending on social services like health care and education will be increased, though the previously announced affordability rebate for households is excluded from the current budget. Despite the challenging economic outlook, the budget does acknowledge affordability through a new Insurance Corporation of British Columbia rebate for eligible drivers and investments in rental housing construction. However, the province’s deficits over the last while, plus the looming economic uncertainty, ultimately left the province little room to add new programs.

The imposition of broad U.S. tariffs on Canadian goods will have pronounced implications for B.C.’s fiscal standing. The government estimates that tariffs and Canadian retaliatory measures could reduce annual revenues by up to $3.4 billion. The Conference Board of Canada has previously analyzed the provincial impacts of U.S. tariffs. While the economic impact of the tariffs will be severe, B.C. boasts a more diversified set of trading partners than other provinces. The latest budget doesn’t outline specific support programs to mitigate the impacts of tariffs on workers or businesses. However, it restates the province’s initial strategy for softening the damage, including strengthening the economy by fast-tracking major projects and diversifying trade. If U.S. tariffs persist, the province did responsibly include $4 billion per year in contingencies in their planning.