Skip to main content
Newfoundland and Labrador budget 2023 – Back to deficit (temporarily)
  • Government projects a $160-million deficit in 2023-24 on the expectation the 2022-23 revenue windfall will partially reverse.
  • Stronger economy to put budget back into surplus in 2024-25.
  • 2022-23 initial deficit forecast revised to a large $784 million surplus.
  • The province’s indebtedness position has drastically improved over the pandemic.
  • But the debt load is still the heaviest among the provinces.

The highly abnormal conditions that benefited government finances in the last couple of years are coming to an end. In Newfoundland and Labrador, it will result in a moderate budget deficit of $160 million (-0.4% of GDP) in 2023-24. The government expects revenues to plummet $836 million (-7.9%)—dragged down by lower tax revenues (-$1.2 billion) and offshore royalties (-$97 million) but partially offset by a $503 million increase in federal transfer—while it sees expenditures rising $108 million (+1.1%).

Massive revision to 2022-23 deficit to a big surplus

If the revenue drop looks dramatic, it’s only because it follows a $1.8-billion (+21%) windfall in 2022-23. The projected level next year ($9.7 billion) in fact will still be well above where it was in 2021-22 ($8.7 billion). Stronger than expected revenues have turned the initial $351 million deficit projection for 2022-23 in Budget 2022 on its head. The government now forecasts a hefty $784 million surplus (+1.9% of GDP)—representing a huge $1.1 billion positive swing in the budget balance.

Revenue dip to tip budget into deficit next year…

The dimmer outlook for the year ahead stems from a weaker expected economy (nominal GDP is forecasted to fall 3.4% in 2023), and lower oil production and price assumptions. Several modest tax relief measures—including an extension of the 7-cents fuel tax rebate until March 31, 2024—and targeted support (e.g. for seniors) to cope with the rise in the cost of living will further contribute to the 2023-24 budget shortfall.

…though not for long

A reacceleration of economic growth in 2024, however, will give revenues a boost and stem the red ink. The province expects to return to a surplus position in 2024-25, which it will maintain through the rest of the five-year fiscal plan.

Debt situation now looks much less scary

The positive swing in the fiscal balance in 2022-23 and back-to-back surges in nominal GDP (rising 18% and 11% in 2021 and 2022, respectively) did wonders to the provincial indebtedness picture. Newfoundland and Labrador’s net debt-to-GDP ratio has plummeted from 50% in 2020-21 to an expected 37.3% in 2022-23. The budget shortfall will push it higher to close to 40% next year.

Still-fragile position calls for continued discipline

While the drastic improvement over the pandemic hints it may be out of the danger zone, Newfoundland and Labrador is still in a fragile financial position. It continues to be the province with the heaviest debt load, with any further progress likely to be much more difficult to achieve in the years ahead. Future budgets will need to maintain a disciplined approach in order to fully restore fiscal flexibility over the longer term. We’re pleased to see Budget 2023 aims to do just that.

Newfoundland and Labrador budget summary
($ billions) Revised Projection Projection Projection Projection Projection
  2022-23 2023-24 2024-25 2025-26 2026-27 2027-28
 Total revenues 10,525 9,689 9,974 10,055 9,905 9,802
 Oil risk adjustment     20 40 50 60
 Base expenses   9,378 9,296 9,358 9,413 9,346
 100% funded   471 361 371 371 371
 Total expenditures 9,741 9,849 9,657 9,729 9,784 9,717
 Surplus/(deficit) 784 -160 297 286 71 25
 Net debt 15,699 16,226        

Source: Newfoundland and Labrador Department of Finance

This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. The reader is solely liable for any use of the information contained in this document and Royal Bank of Canada (“RBC”) nor any of its affiliates nor any of their respective directors, officers, employees or agents shall be held responsible for any direct or indirect damages arising from the use of this document by the reader. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates. This document may contain forward-looking statements within the meaning of certain securities laws, which are subject to RBC’s caution regarding forward- looking statements. ESG (including climate) metrics, data and other information contained on this website are or may be based on assumptions, estimates and judgements. For cautionary statements relating to the information on this website, refer to the “Caution regarding forward-looking statements” and the “Important notice regarding this document” sections in our latest climate report or sustainability report, available at: https://www.rbc.com/community-social- impact/reporting-performance/index.html. Except as required by law, none of RBC nor any of its affiliates undertake to update any information in this document.