Scotiabank Sees Net Debt-to-GDP Ratio Edging Higher This Year Among Canada's Provinces

12:37 PM EST, 02/17/2026 (MT Newswires) -- The Canadian provincial 2026 budget season kicks off on Tuesday on the West Coast with British Columbia, said Scotiabank.

Ongoing economic uncertainty and modest growth suggest continued pressures on provincial budgets, especially for those governments that have not delivered on planned expenditure restraint and/or are impacted by lower oil prices, wrote the bank in a note to clients.

In their latest fiscal updates, most provinces revised up their projected deficits for FY26 compared with their plans at the start of the fiscal year, driven by higher spending in all provinces and lower revenues in most, pointed out Scotiabank.

The bank expects most provinces to also increase their deficit projections for future years, given the spending overruns this year, ongoing modest economic growth and the impact of lower oil prices on some provinces.

However, the bank also estimates many provinces to strengthen expenditure restraint efforts to limit the increases in their projected deficits, especially those with higher net debt burdens. Some provinces have already signaled that spending cuts will be part of their new budget plans. New measures will likely be "modest."

The provinces will need to balance deficit reduction efforts with needs to invest in infrastructure, including to help expand overseas trade, stated Scotiabank. As a result, finding operational spending efficiencies will be critical, in addition to using a "pro-growth" lens for incremental new spending. Provinces should also focus on other economic policy levers, including removing barriers to business investment.

The aggregate net debt-to-GDP ratio is projected to increase to around 31% in FY26 from roughly 29% the previous year, according to Scotiabank. Given elevated deficits and capital investments, provincial borrowing is likely to increase in FY27.

Despite mostly higher deficits, provincial spreads narrowed over the course of the last year, it added.

MT Newswires does not provide investment advice. Unauthorized reproduction is strictly prohibited.