{"id":10198,"date":"2026-04-29T22:14:57","date_gmt":"2026-04-29T22:14:57","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=10198"},"modified":"2026-04-29T22:27:33","modified_gmt":"2026-04-29T22:27:33","slug":"newfoundland-and-labrador-budget-2026-government-shelves-spending-cuts-and-deficit-reduction-plan","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/provincial-and-fiscal-outlooks\/provincial-budgets-and-economic-statements\/newfoundland-and-labrador-budget-2026-government-shelves-spending-cuts-and-deficit-reduction-plan\/","title":{"rendered":"Newfoundland and Labrador budget 2026: Government shelves spending cuts and deficit reduction plan"},"content":{"rendered":"\n<section class=\"wp-block-rbc-section-block  pos-rel\" style=\"border-radius:0px\">\n<div class=\"wp-block-rbc-section-inner-block  section-inner\" style=\"border-radius:0x\">\n<ul class=\"wp-block-rbc-list is-style-chevron-list\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Newfoundland and Labrador projects a $688 million shortfall (1.4% of GDP) in 2026-27, with no plans for balance over the fiscal planning period.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>The 2025-26 bottom line deteriorates sharply to $729 million\u2014nearly double Budget 2025&#8217;s projection and 2.5 times larger than the prior year\u2014driven almost entirely by higher-than-expected Social Sector spending.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>The province projects nominal GDP growth of 10% in 2026, driven by stronger oil and mining export value.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>The improved economic backdrop will marginally narrow the net debt-to-GDP ratio to 43.5% in 2026-27, but this still leaves Newfoundland and Labrador with the highest debt burden of the provinces.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-wide wide\" \/>\n\n\n\n<div id=\"everviz-MHILeg6bz\" class=\"everviz-MHILeg6bz\" data-view=\"graph\"><\/div>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-wide wide\" \/>\n\n\n\n<p>Newfoundland and Labrador is the latest province to scratch out its plans for balance and show deficits over the entire course of the fiscal plan\u2014a shift that\u2019s particularly troubling given the upward revisions to the economic growth outlook, which typically strengthen a government&#8217;s fiscal position.<\/p>\n\n\n\n<p>The province&#8217;s deficit for 2025-26 is expected to reach $729 million\u2014nearly double Budget 2025&#8217;s projection and two and a half times the prior year&#8217;s deficit. The deterioration stems largely from higher-than-anticipated spending in education and health\u2014key campaign commitments from the new government.<\/p>\n\n\n\n<p>But the fiscal decline didn&#8217;t emerge suddenly. The province&#8217;s December update had already signalled a $948 million deficit for 2025-26, driven partly by a downward revision to oil prices to US$66 per barrel, from the $73 assumption in Budget 2025.<\/p>\n\n\n\n<p>Moving forward, deficits are set to deepen medium-term. Spending is expected to remain on a higher track as expenditures grow modestly\u2014rather than fall outright in the current and subsequent two fiscal years, as previously planned.<\/p>\n\n\n\n<p>Revenues are targeted to grow this fiscal year (2026-27) before dropping 3.5% in 2027-28 to accommodate new measures including:<\/p>\n\n\n\n<ul class=\"wp-block-rbc-list is-style-chevron-list\">\n<li class=\"wp-block-rbc-list-item\">\n<p>Increasing the basic personal amount exempt from income tax to $15,000.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Increasing the Newfoundland and Labrador Seniors\u2019 Benefit by 20% effective July 1<sup>st<\/sup>.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Reduction in the Small Business Tax rate to 1.5% from 2% effective January 2027, then to 1% effective January 2028.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<h4 class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-f288c6046a6fab953503b45dd27b2b83\" id=\"h-improved-growth-outlook-rests-on-stronger-oil-and-mining-sectors\">Improved growth outlook rests on stronger oil and mining sectors<\/h4>\n\n\n\n<p>The 2026 budget projects nominal GDP to expand by a whopping 10%\u2014substantially above consensus forecasts, which cluster around 5%.<\/p>\n\n\n\n<p>Upgrades to the economic backdrop reflect a stronger outlook for the oil and mining sectors. Higher oil prices\u2014Brent crude is assumed to be US$81.10 per barrel or 13% higher in 2026 compared to Budget 2025\u2019s assumption\u2014and rising oil production from the West White Rose field is commencing in the second half of the year, alongside the first full year of production from the Valentine and Hammerdown gold mines will supercharge the province\u2019s resource output. Together, these developments are expected to boost royalties and mining taxes.<\/p>\n\n\n\n<p>The 10% nominal GDP projection may not be farfetched considering Newfoundland and Labrador posted 20% nominal growth in 2021, the last time oil prices soared.<\/p>\n\n\n\n<p>Though materially higher than our own assumptions, the province&#8217;s outlook reflects more recent information on the Middle East conflict, which emerged only days before publication of our most recent <a href=\"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/featured-analysis\/quarterly-canadian-outlook\/quarterly-canadian-outlook-growth-headwinds-offset-by-stabilizing-trade-and-jobs\/\" target=\"_blank\" data-dig-id=\"LP-CanadianAnalysis-ProvincialandFiscalOutlooks-10198-235b9a54\" data-dig-category=\"LP-CanadianAnalysis-ProvincialandFiscalOutlooks\" data-dig-action=\"link click\" data-dig-label=\"provincial forecast\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">provincial forecast<\/a>.<\/p>\n\n\n\n<p>Material downside risks remain, however. Trade policy uncertainty and commodity price fluctuations could dampen growth and revenues, widening deficits if projections miss.<\/p>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;69f2bd11ca8fa&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"69f2bd11ca8fa\" class=\"wp-block-image aligncenter size-full is-resized wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"3796\" height=\"2610\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" src=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NFL-2026-Economic-growth-assumptions-2026.png?quality=80\" alt=\"\" class=\"wp-image-10203\" style=\"width:500px\" srcset=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NFL-2026-Economic-growth-assumptions-2026.png 3796w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NFL-2026-Economic-growth-assumptions-2026.png?resize=300,206 300w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NFL-2026-Economic-growth-assumptions-2026.png?resize=768,528 768w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NFL-2026-Economic-growth-assumptions-2026.png?resize=1024,704 1024w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NFL-2026-Economic-growth-assumptions-2026.png?resize=1536,1056 1536w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NFL-2026-Economic-growth-assumptions-2026.png?resize=2048,1408 2048w\" sizes=\"auto, (max-width: 3796px) 100vw, 3796px\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\taria-label=\"Enlarge\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.imageButtonRight\"\n\t\t\tdata-wp-style--top=\"state.imageButtonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n\n\n\n<h4 class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-0e4cd65739f70caf36c5a1f660426550\" id=\"h-spending-cuts-shelved-as-government-abandons-deficit-reduction-plan\">Spending cuts shelved as government abandons deficit reduction plan<\/h4>\n\n\n\n<p>Last year, we <a href=\"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/provincial-and-fiscal-outlooks\/provincial-budgets-and-economic-statements\/newfoundland-and-labrador-budget-2025-balance-delayed-until-2026-27-amid-record-spending\/\" target=\"_blank\" data-dig-id=\"LP-CanadianAnalysis-ProvincialandFiscalOutlooks-10198-235b9a54\" data-dig-category=\"LP-CanadianAnalysis-ProvincialandFiscalOutlooks\" data-dig-action=\"link click\" data-dig-label=\"noted\" rel=\"noreferrer noopener\" class=\"rbc-link-format\">noted<\/a> that the government&#8217;s plan to achieve budget balance by 2026-27 hinged on their plan to cut spending by 3.1% and holding that line through the end of the decade\u2014a tall order given Newfoundland and Labrador has recorded only two year-over-year spending declines in the last twenty years. We cautioned that if the government failed to execute these cuts, deficits would deteriorate significantly\u2014which is precisely what\u2019s playing out.<\/p>\n\n\n\n<p>Budget 2026 abandons plans to reduce expenditures and now projects a 1.1% ($120 million) increase in 2026-27 as well as modest expenditure growth over the remainder of the fiscal plan. This will keep spending above the $11 billion mark for the entire forecast period.<\/p>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;69f2bd11cb51b&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"69f2bd11cb51b\" class=\"wp-block-image aligncenter size-full is-resized wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"2064\" height=\"1598\" data-wp-class--hide=\"state.isContentHidden\" data-wp-class--show=\"state.isContentVisible\" data-wp-init=\"callbacks.setButtonStyles\" data-wp-on--click=\"actions.showLightbox\" data-wp-on--load=\"callbacks.setButtonStyles\" data-wp-on-window--resize=\"callbacks.setButtonStyles\" src=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NL-consolidated-fiscal-plan-2026-Recovered.png?quality=80\" alt=\"\" class=\"wp-image-10223\" style=\"width:500px\" srcset=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NL-consolidated-fiscal-plan-2026-Recovered.png 2064w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NL-consolidated-fiscal-plan-2026-Recovered.png?resize=300,232 300w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NL-consolidated-fiscal-plan-2026-Recovered.png?resize=768,595 768w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NL-consolidated-fiscal-plan-2026-Recovered.png?resize=1024,793 1024w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NL-consolidated-fiscal-plan-2026-Recovered.png?resize=1536,1189 1536w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/NL-consolidated-fiscal-plan-2026-Recovered.png?resize=2048,1586 2048w\" sizes=\"auto, (max-width: 2064px) 100vw, 2064px\" \/><button\n\t\t\tclass=\"lightbox-trigger\"\n\t\t\ttype=\"button\"\n\t\t\taria-haspopup=\"dialog\"\n\t\t\taria-label=\"Enlarge\"\n\t\t\tdata-wp-init=\"callbacks.initTriggerButton\"\n\t\t\tdata-wp-on--click=\"actions.showLightbox\"\n\t\t\tdata-wp-style--right=\"state.imageButtonRight\"\n\t\t\tdata-wp-style--top=\"state.imageButtonTop\"\n\t\t>\n\t\t\t<svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"12\" height=\"12\" fill=\"none\" viewBox=\"0 0 12 12\">\n\t\t\t\t<path fill=\"#fff\" d=\"M2 0a2 2 0 0 0-2 2v2h1.5V2a.5.5 0 0 1 .5-.5h2V0H2Zm2 10.5H2a.5.5 0 0 1-.5-.5V8H0v2a2 2 0 0 0 2 2h2v-1.5ZM8 12v-1.5h2a.5.5 0 0 0 .5-.5V8H12v2a2 2 0 0 1-2 2H8Zm2-12a2 2 0 0 1 2 2v2h-1.5V2a.5.5 0 0 0-.5-.5H8V0h2Z\" \/>\n\t\t\t<\/svg>\n\t\t<\/button><\/figure>\n\n\n\n<p>Higher spending will stem primarily from the Social Sector, the government&#8217;s largest spending category at $7.9 billion in 2026-27. Education and Early Childhood Development is slated for a large 16% increase from fiscal 2025-26, while Health and Community Services faces an even more dramatic 44% increase\u2014the largest expansions in both percentage and absolute terms.<\/p>\n\n\n\n<h4 class=\"wp-block-heading has-rbc-bright-blue-color has-text-color has-link-color wp-elements-0ea955bc9c7509f47b0b224e8e28f8db\" id=\"h-debt-burden-remains-the-heaviest-in-canada-despite-gdp-upgrade\">Debt burden remains the heaviest in Canada despite GDP upgrade<\/h4>\n\n\n\n<p>By our calculation, Newfoundland and Labrador&#8217;s net debt burden is projected to narrow marginally to 43.5% of GDP in 2026-27.<\/p>\n\n\n\n<p>The sizable upgrade to the province\u2019s GDP forecast has tempered what would\u2019ve otherwise been a more dramatic deterioration in the province\u2019s net debt position. Newfoundland and Labrador will continue to hold the highest net debt-to-GDP ratio of any province, making it the least fiscally flexible to buffer the economy from new shocks or respond to economic headwinds should they arise.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-wide wide\" \/>\n\n\n\n<div id=\"everviz-2-QIQGw_C\" class=\"everviz-2-QIQGw_C\" data-view=\"graph\"><\/div>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-wide wide\" \/>\n\n\n\n<p class=\"has-text-align-center\"><strong>About the Author:<\/strong><\/p>\n\n\n\n<p><em><strong>Rachel Battaglia<\/strong>&nbsp;is an economist at RBC, providing forecasts for the Canadian provincial economies and analyzing key trends in housing and consumer spending.<\/em><\/p>\n\n\n\n<hr class=\"wp-block-separator has-alpha-channel-opacity is-style-wide wide\" \/>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"","protected":false},"author":318,"featured_media":10231,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"advgb_blocks_editor_width":"","advgb_blocks_columns_visual_guide":"","footnotes":""},"categories":[83,91,45],"tags":[105,115,11,53],"rbc_econ_content_type":[],"class_list":["post-10198","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-canadian-analysis","category-provincial-and-fiscal-outlooks","category-provincial-budgets-and-economic-statements","tag-budget","tag-canada","tag-economy","tag-newfoundland-and-labrador"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v27.2 (Yoast SEO v27.2) - https:\/\/yoast.com\/product\/yoast-seo-premium-wordpress\/ -->\n<title>Newfoundland and Labrador budget 2026: Government shelves spending cuts and deficit reduction 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