PEI

P.E.I. budget surplus party unlikely to continue without changes, says APEC

The P.E.I. government tabled its third budget surplus in a row last month, but the Atlantic Provinces Economic Council says in the long term surpluses will not continue without new tax revenues or spending cuts.

Slower growth, more spending pressures coming

The P.E.I. government has been recording surpluses since 2017. (Kevin Yarr/CBC)

The P.E.I. government tabled its third budget surplus in a row last month, but the Atlantic Provinces Economic Council is predicting that in the long term, surpluses will not continue without new tax revenues or spending cuts.

The province saw an additional $156 million in revenue for 2019-20, and promised to spend almost all of it.

In a news release Thursday morning, APEC cautioned that economic growth is expected to slow and populations are expected to age in the coming decades.

"Aging demographics … could lead to slower economic growth longer term, as well as more fiscal pressures such as spending on health care," said APEC senior policy analyst Fred Bergman.

'Fiscal pressures for government'

Economic growth has been a key part of eliminating the deficit, and much of that was driven by immigration — which has also reversed the aging trend of the population.

But Bergman does not see the rate of immigration on the Island as sustainable.

"At what point do you even hit constraints within your economy, whether it's housing constraints — which P.E.I. is facing now — infrastructure constraints like highways, health-care system, hospitals, schools," he said.

"Because as you have strong population growth, at what point do you have to start making more investments in infrastructure? Which itself creates fiscal pressures for government."

This growth is beneficial in the short term, but over the course of decades will not solve the underlying problems with fiscal sustainability, said Bergman.

According to an analysis by the Parliamentary Budget Office, most provinces — and all the Atlantic provinces — share this problem. APEC is recommending P.E.I. start preparing for these future budget imbalances now.

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About the Author

Kevin Yarr is the early morning web journalist at CBC P.E.I. You can reach him at kevin.yarr@cbc.ca.

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