B.C. projected deficit is $13.8 billion for 2026-2027, $450 million higher than projected in February

B.C.’S economy continues to show resilience despite wildfires, global uncertainty and another round of U.S. tariffs, according to the Province’s First Quarterly Report.

“We know that U.S. tariffs and global instability are creating uncertainty for workers and communities across B.C.,” said Josie Osborne, Minister of Finance, on Monday. “But B.C. is adapting, our exports are growing and we are reaching markets around the world. We continue to work with the federal government to protect the services people rely on and build a stronger, more self-reliant economy.”

Revenue is forecast at $86.3 billion, $789 million higher than Budget 2026. Stronger income tax and sales tax revenues are helping offset lower revenues from natural resources and the housing market.

Provincial spending also increased as an intense wildfire season has taken a toll on people and communities. The fire-management expenditures are forecast to be $614 million higher than the budget. Spending on refundable tax credits also rose by $458 million as more people and businesses took advantage of the renters’ tax credit, which supports housing affordability, and the productions services tax credit program that helps sustain jobs and keep the province’s film and video production industry competitive.

The updated revenue and expense forecasts result in a projected deficit of $13.8 billion for 2026-2027, $450 million higher than projected in February, with declining deficits for 2027-2028 and 2028-2029.

The Province says B.C. businesses are already adapting to changes in global trade. Goods exports have increased so far this year, with exports to non-U.S. destinations rising 16% as businesses expanded trade with markets including China, South Korea and India. The overall value of B.C. goods exports increased 4.2% year to date untiil July 2026, largely due to strong demand and prices for copper.

Other areas are also showing strength. Manufacturing shipments increased 9.1% year to date until June 2026, while international tourism increased by 6.6% year to date until June, supported by FIFA-related tourism.

At the same time, the latest U.S. tariffs are expected to create additional challenges for industries, including forestry, aluminum and manufacturing. The Province will continue working with the federal government to support affected workers and businesses while continuing to expand and diversify markets for B.C. products.

B.C.’s economic performance has been mixed in 2026 amid external economic volatility from U.S. tariffs, the conflict in the Middle East and tighter federal immigration policy. Real GDP is forecast to grow by 0.9% in 2026, which is narrowly lower than projected in Budget 2026. However, GDP growth is expected to strengthen to 1.9% in 2027, as trade networks adjust, population growth trends upward and economic uncertainty begins to ease. Looking ahead, GDP growth is expected to average 2.1% annually over the 2028-2030 period.

Inflation was 2.9% in July, largely due to elevated oil prices and global supply-chain disruptions linked to the conflict in the Middle East. Inflation is forecast to average 2.5% in 2026 before returning to 2% in 2027.

Government says it is continuing to take careful steps to manage spending and protect the services people in B.C. rely on. At the same time, the Province is continuing to invest in infrastructure and supporting workers, businesses and communities as B.C. navigates ongoing global economic uncertainty.

Taxpayer-supported capital spending is forecast at $12.9 billion in 2026-2027, supporting investments in health-care facilities, K-12 and post-secondary schools, roads and public transit, and housing. Since Budget 2026, eight major capital projects have been approved, including two BC Housing projects and six BC Hydro projects to support growing communities and a stronger economy. Moreover, 23 new schools and additions opened in September 2026, providing 4,700 students with a space to learn.

Through the Look West Strategy, the Province is also working to strengthen B.C.’s economic independence by expanding trade beyond the U.S., advancing major projects and attracting investment that creates good jobs throughout the province.

Learn More:

* To access the First Quarterly Report, visit: https://www2.gov.bc.ca/gov/content/governments/finances/reports/quarterly-reports

BACKGROUNDER
First Quarterly Report 2026-2027

Economic highlights

* B.C.’s goods exports increased 4.2% year to date until July 2026, despite ongoing U.S. tariff and trade uncertainty. Exports to non-U.S. destinations increased 16%.

* Manufacturing shipments increased 9.1% year to date until June 2026, led by gains in shipments of primary metals, machinery and food products.

* Retail sales increased 1.9% year to date until June 2026.

* International travellers entering B.C. increased 6.6% year to date until June 2026, supported by FIFA-related tourism.

* B.C.’s economy is projected to see 0.9% gross domestic product (GDP) growth in 2026, 1.9% growth in 2027 and average 2.1% from 2028 to 2030.

* Employment has decreased by 0.6% year to date until August 2026. B.C.’s unemployment rate was 6.5% in August 2026.

* Inflation was 2.9% in July 2026, largely due to elevated gasoline prices and global supply-chain disruptions linked to the conflict in the Middle East. Inflation is forecast to average 2.5% in 2026 before returning to 2% in 2027.

* Housing starts were down 9.3% and home sales were down 6% year to date until July, reflecting economic uncertainty, affordability challenges, labour market softness and an extended pause in Bank of Canada interest rate cuts.

Operating results

* Revenue for 2026-2027 is forecast at $86.3 billion, $789 million higher than Budget 2026.

* The deficit is forecast at $13.8 billion in 2026-27, $450 million higher than Budget 2026.

* Higher personal and corporate income tax revenue, sales tax revenue and federal contributions are partly offset by lower natural-resource and property transfer-tax revenue.
* Corporate income tax revenue is up $416 million.

* Personal income tax revenue is up $471 million mainly due to improved growth in household income.

* Provincial sales tax revenue is up $169 million, consistent with retail sales growth.

* Property tax revenues are down $33 million, mainly because 2026 residential assessment values were lower than anticipated.

* Natural-resource revenues are forecast to be $289 million lower than budget 2026 mainly due to:
– Natural gas royalties are $531 million lower, including approximately $306 million related to the correction of calculation errors in the Budget 2026 price forecast. The remaining change reflects lower price expectations and updated assumptions for the proposed new royalty framework.

– Forest revenue is $49 million lower, as the sector faces higher operating costs and tariffs.

– Other natural resources revenues are up $82 million reflecting improvements in oil royalty revenues, Crown land tenures and water rentals offset by lower electricity sales under the Columbia River Treaty.

– Mining revenue is $209 million higher than Budget 2026, mainly due to improved mine profitability.

* Expenses are forecast to be $1.2 billion higher than Budget 2026, mainly due to:
– $614 million in additional fire-management costs

– $458 million in higher refundable tax credits

– Debt servicing costs are forecast to be $27 million lower than budget due to lower capital borrowing requirements.

Capital spending

* Taxpayer-supported capital spending is forecast at $12.9 billion in 2026-2027 for hospitals and health-care facilities, schools, transportation infrastructure, housing, and other projects.

* The forecast is $716 million lower than Budget 2026, due to expected changes in the timing of projects in the transportation, health and education sectors.

* Total provincial capital spending, including self-supported Crown corporation investments, is forecast at approximately $18 billion.

* Since Budget 2026, eight major capital projects have been added.

* Projected capital spending forecast for 2026-2027 includes Quw’utsun Valley Hospital, the new St. Paul’s Hospital, new schools in Maple Ridge, Kamloops and Quesnel, and the Highway 1 Colquitz River Bridges widening project.

Debt levels

* Total provincial debt is forecast at $180.9 billion at the end of 2026-2027, $2.5 billion lower than Budget 2026.

* Taxpayer-supported debt is forecast at $141.1 billion, down $1.3 billion from Budget 2026.

* B.C.’s taxpayer-supported debt-to-GDP ratio is forecast at 30.1%, lower than projected at Budget 2026.

* B.C. continues to maintain low debt-affordability metrics compared with other provinces.