Notes Newfoundland and Labrador in good position due to own-source revenues
The Atlantic provinces are in the midst of a sharp reversal in their fiscal fortunes with deficits in all four provinces pushing public debt up rapidly, according to the latest Report Card by the Atlantic Provinces Economic Council (APEC).
Only in Newfoundland and Labrador has own-source revenues expanded faster than spending in the last five years, leaving it best positioned to realign expenditures with revenues, the report notes.
"The recession caused a sharp slowdown in revenue growth, deepened by a decline in resource revenues due to falling commodity prices," said APEC senior policy analyst Fred Bergman.
"Meanwhile, program spending continues to grow."
According to a news released, APEC states that with infrastructure stimulus spending also adding to borrowing requirements, provincial debt in the Atlantic region will expand by between 9 per cent and 14 per cent in 2009/10.
"The Atlantic provinces need to establish credible, long-term and detailed plans to return to fiscal balance" Bergman said. "This requires them to adjust both the level and long-term growth path of government spending to match projected revenues."
APEC said measures taken to restrain government spending need to be sustainable.
The report notes that in the mid-1990s, provincial governments did succeed in containing the growth rate of program spending. However, in the last five years, program spending growth has accelerated to between 6 per cent and 8 per cent.
Particularly, governments need to address spending in core areas such as health care which accounts for about 35 per cent of total program spending in Newfoundland and Labrador and Prince Edward Island, and about 40-41 per cent of program spending in Nova Scotia and New Brunswick.
The report notes that resource revenues have lifted Newfoundland and Labrador from Canada's most indebted province in 1998/1999 to the province with the fifth-lowest debt-to-GDP ratio 10 years later. Offshore royalties are expected to average well over $2 billion per year over the next 10 years. Nevertheless, with offshore royalties accounting for 37 per cent of total revenues in 2008/09, the province is heavily exposed to fluctuations in oil output and global oil prices.