• New Brunswick projects a $599 million deficit in 2025-26 following a $399 million shortfall in 2024-25, marking a shift from the recent streak of surpluses.
  • General government programs, debt charges, health and a new contingency reserve account for most of the spending increase.
  • Nominal gross domestic product growth assumptions are more conservative than ours, but do not reflect the full implementation of tariffs or potential Canadian countermeasures—adding downside risk to the revenue outlook.
  • The budget anticipates a heavier net debt burden over the fiscal plan, reaching a post-pandemic high of 28.5% by 2028-29. This still compares well to other provinces.

New Brunswick’s 2025 Budget breaks a long string of surpluses, reflecting growing economic uncertainty, and increased spending.

The largest shortfall of $599 million is expected in fiscal 2025-26, mainly driven by increased program spending and a new $50-million contingency allowance to protect against unforeseen events—including those related to the U.S. trade war. The move away from surpluses started with the significant downward revision to the 2024-25 fiscal balance from a $41 million surplus to a $399 million shortfall.

Trade and population growth risks weigh on outlook

Moderating population growth has been a noted challenge for New Brunswick’s outlook, but trade uncertainty could have an even more pronounced impact. Together, these challenges are keeping growth projections below the national average in 2025 and 2026.

Still, revenues are expected to rise by $527 million (4%) in 2025-26—$150 million short of the anticipated expenditure increase. While the nominal GDP assumptions underpinning these revenue forecasts are more conservative than ours , they do not fully account for U.S. tariffs or potential Canadian countermeasures, which are a risk to the forecast. Escalation of the trade war would further dim the province’s economic outlook.

Program spending adds weight to bottom line

Total expenditures are set to rise $677 million (4.9 %) in 2025-26—with more than a third coming from general government programs ($156 million) and public debt charges ($90 million). Public debt charges are expected to approach the $700 million mark in 2025-26, nearly three times the budget allocated to New Brunswick’s Housing Corp.

Healthcare spending is another notable source of expenditure growth, rising $75 million in fiscal 2025-26. The increased allocation comes largely from community care clinics ($30 million) and physician compensation ($16 million).

The rapid expenditure increase is addressed in Budget 2025 with acknowledgement of the unsustainability of current spending patterns. Whether spending cuts materialize, however, remains to be seen.

Slight rise in debt load won’t jeopardize past progress

New Brunswick’s fiscal position has been a source of strength in recent years. Concerted efforts were made to shrink the debt burden in recent decades—which is now the lowest it’s been in more than 30 years. This gives it more flexibility to navigate uncertain times without large and broad-based spending cuts to government programs and services.

In response to the current climate, the government plans to deviate from its declining net debt-to-GDP trajectory. The debt burden is now projected to rise over the course of the fiscal plan, reaching 28.5% by 2025-29. Despite the increase, New Brunswick will continue to have one of the lightest debt burdens among all provinces.

Rachel Battaglia is an economist at RBC. She is a member of the Macro and Regional Analysis Group, providing analysis for the provincial macroeconomic outlook and budget commentaries.

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