Scotiabank Notes Nova Scotia's Rising Healthcare Spending Expands The Provincial Deficit

06:52 AM EST, 12/19/2025 (MT Newswires) -- Nova Scotia's December 2025 forecast update revised the provincial budget balance for fiscal year 2025-26 (FY26) to a deficit $1.47 billion, or 2.1% of nominal GDP, after accounting for contingencies, said Scotiabank.

The latest outlook sees a larger deficit for the current fiscal year, rising from $900 million, or 1.4% of nominal GDP, expected in Budget 2025-26, as higher departmental expenses outweigh higher revenue. The update also reports a $25 million drawdown from the $200 million contingency funding set aside at the beginning of the fiscal year, with $175 million in contingency remaining.

Total expenses in the December 2025 update were revised higher by $722 million, or 4.1%, compared with Budget 2025-26. The increase in spending is largely concentrated in the departments of Health and Wellness (+$416.1 million, +7%) and Seniors and Long-Term Care (+$83.5 million, +5.7%), as increased utilization and inflationary pressures add to the province's healthcare spending, noted the bank.

There is also higher than previously forecasted spending on restructuring costs (+$172 million, +31.2%), primarily due to corporate initiatives.

Meanwhile, the total revenue forecast for FY26 was revised up by $144 million, or 0.9%, compared with the Spring Budget. The revenue windfall is primarily owing to higher projected corporate income taxes (+$48.8 million, +5.8%), federal transfers (+$57.5 million, +1%), and positive prior year adjustments (+$82 million).

This is partially offset by reduced forecasts for personal income taxes (-$79.3 million, -1.7%), due to lower-than-expected taxable income in 2024, and investment income (-$65 million, -30.2%), primarily owing to an accounting adjustment change.

There is no updated forecast for net debt, added Scotiabank. However, the larger deficit could reasonably push net debt levels higher.

The forecast for nominal GDP growth in 2025 was left unchanged from the Spring Budget at 4.7%, while real GDP growth was lowered to 1.5% from 2% previously.

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