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Nova Scotia’s fiscal update projects $853M deficit as a result of COVID-19

Click to play video 'Nova Scotia facing $853M deficit related to COVID-19, Finance Minister announces' Nova Scotia facing $853M deficit related to COVID-19, Finance Minister announces
Nova Scotia’s finance minister Karen Casey announced on Wednesday that the province is now projecting a $853 million deficit, which she said is mainly a result of the coronavirus pandemic response that has “significantly increased our expenses.” – Jul 29, 2020

Nova Scotia’s 2020-21 budget has been obliterated by the coronavirus pandemic, according to the province’s finance minister Karen Casey.

In February, the province had projected a $55-million surplus in its budget. But according to a fiscal update provided by Casey on Wednesday, that has now fallen by $907 million to a deficit of $852.9 million.

“Our strong economy was an advantage entering this pandemic,” Casey said.

“However, we cannot diminish or underestimate the magnitude of what we are facing as a province and as a country.”

Read more: N.S. Liberal budget opens up spending taps as province faces slowing economy

Economic changes unlike anything the province has seen

Tuesday was the first update on the 2020-21 budget provided by the government since the budget was quickly passed in March in what was the shortest budget sitting in the province in 14 years.

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In the intervening time period, the novel coronavirus has swept across the globe, affecting global markets and shutting down businesses.

The province has been under a state of emergency since March 22 and public health orders have been in place since March 13 in an attempt to contain the spread of the virus.

But those actions have had a dramatic impact on the province’s fiscal situation, with the government saying the speed and severity of the economic hit are unlike anything they have seen.

“Travel rules, social distancing measures, falling consumer demand, mandated business closures and additional safety costs have been particularly hard on local services,” the forecast update reads.

Nova Scotia’s ability to recover economically is heavily reliant on what happens next in the COVID-19 pandemic, with “positive developments” around public health measures and a possible vaccine being beneficial to the province’s outlook.

Consumer confidence that they can safely makes purchases will also be key in the province’s economic outlook.

Click to play video 'HRM to cut $85M in spending' HRM to cut $85M in spending
HRM to cut $85M in spending – May 11, 2020

$671 million in appropriations since June

The province has also had to make additional appropriations for nine of its departments in July in order to facilitate the continuation of services and attempts to stimulate the economy.

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The appropriations made in July total $443.4 million, with a little more than $339 million of that figure going to the Department of Health and Wellness for personal protective equipment, funding for essential health-care workers, lost revenues and increased pharmacare utilization.

The province says $62.5 million of the appropriations will be for the Education Department and the province’s back-to-school reopening plan.

The July appropriations come in addition to the $228.2 million in appropriations made in June.

In total, the province says it has made $671 million in appropriations since June.

Read more: Nova Scotia not yet in deficit despite economic uncertainty: Casey

The fiscal update also makes clear that the province’s net debt will increase. The initial budget had put this year’s debt at $15.7 billion.

In the fiscal update, debt is expected to increase by $1.2 billion to $16.9 billion in 2020-21.

That’s due in part to a decrease in total provincial revenue.

In the fiscal update, total provincial revenue is forecasted to be $11.1 billion, a decrease of $532 million from the initial budget. That’s mostly the result of decreased revenue from HST and corporate income tax.

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the province is projecting an unemployment rate of 11 per cent – the highest figure since 1997. That’s due to nominal economic growth that is 7.6 per cent lower than forecasted in the February budget. Finance officials, however, said they expect the economy to rebound next year.

Casey warned the latest numbers will change by her December update because they don’t include the final figures for fiscal 2019-20, or Nova Scotia’s share of the federal Safe Restart program, which is expected to be more than $250 million.

She did not include an estimate for the cost of a public inquiry into April’s mass shooting – which killed 22 people – although Justice Department costs did increase by $3.2 million because of additional RCMP expenses related to the tragedy.

Click to play video 'Coronavirus: Nova Scotia can move forward with both public safety, economic recovery safely, Finance Minister says' Coronavirus: Nova Scotia can move forward with both public safety, economic recovery safely, Finance Minister says
Coronavirus: Nova Scotia can move forward with both public safety, economic recovery safely, Finance Minister says – Jul 29, 2020

Progressive Conservative finance critic Murray Ryan said he was surprised the deficit wasn’t bigger, adding Casey’s updated figures only include the fiscal picture up until late May along with some revenues and expenses that reflect the situation as of July 8.

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“We are going to be running deficits for a few years,” said Ryan. “I think we just have to manage things properly and look to help the businesses and the industries that are in the most crises.”

Claudia Chender, the NDPs finance critic, said the fiscal snapshot showed a lack of “planning and foresight” by the Liberal government. “The Liberals have failed to take into account the need for increased investment in education, child care, long-term care and housing,” Chender said in a news release.

Nova Scotia’s financial situation is similar to its Atlantic neighbours.

Newfoundland and Labrador, which shared its fiscal update last week, reported that it was projecting a $2.1-billion deficit for fiscal 2020-21 — an increase of $1.35 billion from last year’s budget.

With files from The Canadian Press