{"id":9574,"date":"2026-04-15T20:35:53","date_gmt":"2026-04-15T20:35:53","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/?p=9574"},"modified":"2026-04-15T20:46:27","modified_gmt":"2026-04-15T20:46:27","slug":"pei-budget-2026-red-soil-province-awash-in-never-ending-red","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/provincial-and-fiscal-outlooks\/budget-analysis\/pei-budget-2026-red-soil-province-awash-in-never-ending-red\/","title":{"rendered":"PEI Budget 2026: Red soil province awash in red"},"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<p>Last year, PEI\u2019s budget delivered the largest projected nominal deficit in the province\u2019s history &#8211; $184 million (1.6% of GDP) for 2025-26. Even then, Budget 2026 has that number coming in much higher at $450 million (4.0% of GDP), by far the largest provincial deficit as a share of the economy.<\/p>\n\n\n\n<p>Deficits improve from 2026-27 on but remain elevated at 2.6% of GDP by the end of the projection period. This is despite optimistic 2026-27 spending assumptions and savings in the outer years from an expenditure review that is just getting started.<\/p>\n\n\n\n<p>Unsurprisingly, the province expects a big jump in its debt burden, surpassing its prior peak in 2013-14 and brushing right up against its fiscal anchor.<\/p>\n\n\n\n<p class=\"mar-t pad-t-hlf has-rbc-bright-blue-color has-text-color has-link-color has-text-lg-font-size wp-elements-6e90f4c5af6080f7f266e90de5037934\"><strong>Deficit<\/strong><\/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>Budget 2026 sees significant red ink across the forecast period with no path to balance. Deficits peak at 4% of GDP in 2025-26 \u2013 the fiscal year just ended \u2013 falling to 2.6% by 2028-29.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Reasonable economic assumptions see revenue growth outpace expenses growth from 2026-27 onwards. While this supports declining deficits, it is not enough to undo the deficit tract given significant deficit jumps in earlier years.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Among provinces, PEI has the largest deficit as a share of the economy throughout the projection period, sometimes by a significant margin. Yet, its growth outlook is above average, per our projections.<\/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-ukPSjKoOl\" class=\"everviz-ukPSjKoOl\" 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=\"mar-t pad-t-hlf has-rbc-bright-blue-color has-text-color has-link-color has-text-lg-font-size wp-elements-f429c6c9dfacb86640267033997820f9\"><strong>Spending<\/strong><\/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>The 2025-26 deficit jumped on the back of 13% year-over-year expenses growth versus the 7% expected in budget 2025. The biggest surprises came in health spending and what appears to be a one time expense in the Agricultural Insurance Corporation.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Going forward, the expenses profile is optimistic. While total expenditures grow 2.0% year-over-year in 2026-27, it\u2019s only 0.7% for program spending. This coincides with projected population growth, implying an expectation for falling real spending.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>For 2027-28 and 2028-29, projected spending grows ~3% (~2% for program spending). These years include expected savings from a newly announced Comprehensive Expenditure Review that seeks to cut 5% of total spending. The allocation of the cuts is yet to be determined.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>Absent these savings, total spending in 2027-28 and 2028-29 would grow at 8% annually \u2013 similar to the high rates in 2024-25 and 2025-26, which makes 2026-27\u2019s projected 2% growth anomalously low.<\/p>\n<\/li>\n<\/ul>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;69e038d255f20&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"69e038d255f20\" class=\"wp-block-image aligncenter size-full is-resized mar-b mar-t pad-b-hlf wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"2208\" height=\"2008\" 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\/PEI-consolidated-fiscal-plan-2026.png?quality=80\" alt=\"\" class=\"wp-image-9587\" style=\"width:500px\" srcset=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/PEI-consolidated-fiscal-plan-2026.png 2208w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/PEI-consolidated-fiscal-plan-2026.png?resize=300,273 300w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/PEI-consolidated-fiscal-plan-2026.png?resize=768,698 768w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/PEI-consolidated-fiscal-plan-2026.png?resize=1024,931 1024w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/PEI-consolidated-fiscal-plan-2026.png?resize=1536,1397 1536w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/PEI-consolidated-fiscal-plan-2026.png?resize=2048,1862 2048w\" sizes=\"auto, (max-width: 2208px) 100vw, 2208px\" \/><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 class=\"has-rbc-bright-blue-color has-text-color has-link-color has-text-lg-font-size wp-elements-6e1a4428b35f4f82bac3290ff991dbf8\"><strong>Debt and fiscal anchors<\/strong><\/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>Higher expected deficits will significantly increase the debt burden, more than unwinding the prior improvement seen since the last peak in 2013-14. By 2028-29, the debt burden will surpass this peak, totaling 39.9%, and brushing right up against the government\u2019s 40% target as part of its fiscal anchor.<\/p>\n<\/li>\n\n\n\n<li class=\"wp-block-rbc-list-item\">\n<p>The government\u2019s other anchor \u2013 interest to revenue \u2013 will also get close to its 7.5% target by the end of the projection period.<\/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-qwUP2r0PW\" class=\"everviz-qwUP2r0PW\" 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=\"mar-b pad-t-hlf has-rbc-bright-blue-color has-text-color has-link-color has-text-lg-font-size wp-elements-3318f6d31891ee85bf5b134ae2c87904\"><strong>Additional Tables<\/strong><\/p>\n\n\n\n<figure data-wp-context=\"{&quot;imageId&quot;:&quot;69e038d257898&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"69e038d257898\" class=\"wp-block-image aligncenter size-full is-resized  mar-t wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"2208\" height=\"1248\" 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\/Fiscal-anchors-PEI-2026-5.png?quality=80\" alt=\"\" class=\"wp-image-9602\" style=\"width:500px\" srcset=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Fiscal-anchors-PEI-2026-5.png 2208w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Fiscal-anchors-PEI-2026-5.png?resize=300,170 300w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Fiscal-anchors-PEI-2026-5.png?resize=768,434 768w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Fiscal-anchors-PEI-2026-5.png?resize=1024,579 1024w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Fiscal-anchors-PEI-2026-5.png?resize=1536,868 1536w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Fiscal-anchors-PEI-2026-5.png?resize=2048,1158 2048w\" sizes=\"auto, (max-width: 2208px) 100vw, 2208px\" \/><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<figure data-wp-context=\"{&quot;imageId&quot;:&quot;69e038d257f3f&quot;}\" data-wp-interactive=\"core\/image\" data-wp-key=\"69e038d257f3f\" class=\"wp-block-image aligncenter size-full is-resized wp-lightbox-container\"><img loading=\"lazy\" decoding=\"async\" width=\"1583\" height=\"1056\" 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\/Pei-Economic-growth-assumptions-2026-5.png?quality=80\" alt=\"\" class=\"wp-image-9603\" style=\"width:500px\" srcset=\"https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Pei-Economic-growth-assumptions-2026-5.png 1583w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Pei-Economic-growth-assumptions-2026-5.png?resize=300,200 300w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Pei-Economic-growth-assumptions-2026-5.png?resize=768,512 768w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Pei-Economic-growth-assumptions-2026-5.png?resize=1024,683 1024w, https:\/\/www.rbc.com\/en\/economics\/wp-content\/uploads\/sites\/23\/2026\/04\/Pei-Economic-growth-assumptions-2026-5.png?resize=1536,1025 1536w\" sizes=\"auto, (max-width: 1583px) 100vw, 1583px\" \/><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<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><strong>Cynthia Leach<\/strong><em>&nbsp;is Assistant Chief Economist at RBC covering the team\u2019s medium-term economic analysis, including primary research areas of federal and provincial fiscal analysis, structural government policy, and demographics.<\/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":9601,"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":[59,83,91],"tags":[105,115,54],"rbc_econ_content_type":[],"class_list":["post-9574","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget-analysis","category-canadian-analysis","category-provincial-and-fiscal-outlooks","tag-budget","tag-canada","tag-prince-edward-island"],"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>PEI Budget 2026: Red soil province awash in red - RBC Economics<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/provincial-and-fiscal-outlooks\/budget-analysis\/pei-budget-2026-red-soil-province-awash-in-never-ending-red\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"PEI Budget 2026: Red soil province awash in red\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/provincial-and-fiscal-outlooks\/budget-analysis\/pei-budget-2026-red-soil-province-awash-in-never-ending-red\/\" \/>\n<meta property=\"og:site_name\" content=\"RBC 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