Balance P.E.I.'s budget, economists urge province
'Rating agencies will likely look askance if the government ... backtracks on its current fiscal targets'
The province should maintain its goal of balancing P.E.I.'s budget and eliminating the deficit, a group of economists is advising government.
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The Board of Economic Advisors provides advice and analysis to the premier and government on economic trends and policy. The board met in mid-March with cabinet, senior civil servants and business leaders and wrote a letter — now posted on the province's website — to Premier Wade MacLauchlan on March 29.
"The board applauded the resolve of your government to continue towards the goal of budget balance. At this meeting, we reiterated the importance of achieving that outcome," writes chairman Tim O'Neill on behalf of the board.
P.E.I.'s budget deficit stands at $32.9 million as of September 2015, and its multi-year fiscal plan forecasts a surplus of $11.9 million in the 2016-17 budget.
The group points out that the P.E.I. economy, while not booming, has slightly outperformed some other provincial economies — and the Canadian average — in economic growth in 2015 and is poised for a repeat.
"With this kind of relative performance, analysts and rating agencies will likely look askance if the government materially backtracks on its current fiscal targets," O'Neill continued.
The eventual elimination of the deficit, the letter said, would allow the province to benefit from any positive economic surprises and to be cushioned against unforeseen downturns.
"In that vein, we agreed with you and your finance minister — as well as finance officials — that the combination of deficit reduction and economic growth would move your debt/GDP ratio down to a more acceptable level than the current 35 per cent," O'Neill said.
Weighing in on taxes, transfers
The group also advised the government that any tax measures should take into account direct impacts on Island residents and businesses, and sales, personal and business tax rates in other jurisdictions with which P.E.I. may compete for investment and workers.
The letter urges government to contain spending to balance the budget, and cautioned that federal transfer payments to P.E.I. could come up short, with the financial impact of low oil prices on formerly booming economies in provinces such as Alberta and Newfoundland and Labrador.
The board also weighed in on the government's goal of increasing P.E.I.'s population. Its advice: ensure immigrants are integrated into both the community and the workforce and provide HR assistance to employers.
"The ultimate purpose of policy should be to enhance the prosperity of Islanders," O'Neill said.
The board also suggested government should try to help match up skilled workers with vacant jobs, noting that several business people complained of difficulty recruiting skilled people, while at the same time P.E.I. has a high unemployment rate "especially of young, educated individuals."
The board of economic advisors includes Tim O'Neill of Cape Traverse, P.E.I., past president of the Atlantic Provinces Economic Council, former APEC president Elizabeth Beale and Michael Horgan, former federal deputy minister of finance. It meets periodically with provincial government officials.
Find the full letter 2016 Letter from Economic Advisor Board Chair here.
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