Manitoba's Provincial 2026 Deficit Widens on Lower Hydro Profit, Wildfire Expenses, Says Scotiabank

07:22 AM EST, 12/16/2025 (MT Newswires) -- The fiscal year 2026 (FY26) deficit forecast of the Canadian province of Manitoba has roughly doubled, despite using up the $200 million contingency reserve set aside in the Spring Budget, said Scotiabank.

The new deficit forecast for the FY26 budget balance is $1.7 billion, or 1.7% of nominal gross domestic product, compared with the Budget forecast of a $800 million deficit, or 0.8% of GDP.

Modest spending growth going forward will be needed to meet the objective of balancing the budget in 2027-28, amid ongoing economic headwinds, noted the bank.

Total revenue for FY26 has been revised down by $756 million, or 3%, compared with Budget 2025 to $24.5 billion. While some of the downward revision in total revenue compared with Budget 2025 is from lower federal transfers (-$133 million), the majority of the gap is concentrated in lower net income from government business enterprises (-$725 milllion).

Manitoba Hydro is projected to have a net loss of $464 million this year owing to drought conditions (-$684 million relative to Budget 2025). The drop in expected revenues has been partially offset by using the full $200 million revenue contingency budget for the year. Overall, revenues are now expected to be 0.6% higher in FY26 compared with FY25.

Total spending for FY26 has been revised up by $311 million, or 1.2%. The higher spending is almost entirely driven by higher-than-expected wildfire costs ($324 million), as increases to Health ($50 million) and Justice ($20 million) were more than offset by reduced Agriculture spending (-$83 million).

Meanwhile, debt servicing costs are unchanged relative to the Spring Budget at $2.3 billion. Total FY26 expenses are now projected to be 2.6% higher than FY25.

Net debt for FY26 has been revised to $38.1 billion, or 38.2% of nominal GDP, up from $36.5 billion, or 36.9% of nominal GDP, in Budget 2025. Net debt levels are projected to increase by 7.9% year over year relative to FY25, compared with the forecast for nominal GDP growth of 3.7% in 2025, which is a tick higher than the 3.6% forecast in Budget 2025.

Meanwhile, real GDP growth for 2025 was revised down by 0.6 percentage point to 1.1% owing to economic headwinds from the wildfires and uncertainty from trade tensions, added Scotiabank.

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