HALIFAX — Pandemic-related costs continue to hammer Nova Scotia's finances with the province now forecasting a $778.8-million deficit for the 2020-21 fiscal year.
The updated figure is $74 million less than the deficit projected in July, but it is also a far cry from the $55-million surplus the government initially thought it would have this fiscal year.
Finance Minister Karen Casey told reporters on Thursday that the deficit was not a structural one where there is a mismatch between government revenue sources and the costs for its programs and services.
"We will recover," Casey said. "This deficit is short-term, caused by the economic shock from COVID-19 and the temporary measures that we've put in place to manage our public health crisis."
The slight improvement over July's forecast is mainly due to a larger than expected cash transfer from Ottawa.
At almost $4.3 billion, the federal contribution is $421 million more than forecast in the February budget and $350 million more than expected in July. The bulk of that is through the federal government's Safe Restart Agreement.
Casey said the government also increased spending within 10 departments by another $298.8 million, most of which covered pandemic-related costs. Overall, Finance Department documents detail $905 million in combined capital and operating spending to deal with pandemic costs.
Another main contributor to the red ink is a drop in tax revenues on nearly all fronts, including personal income tax, fuel tax and the Harmonized Sales Tax. The biggest decline is to corporate income tax revenue at $146.1 million.
As a result, Nova Scotia's overall expenses are projected to be $12.32 billion, up $708.7 million since the February budget was stabled.
The increased spending and drop in revenues means the net debt is also forecast to jump by $1.1 billion this fiscal year to $16.8 billion.
Casey said the need for ongoing COVID-19 support measures means the Finance Department has asked for the authority to borrow another $1 billion this fiscal year if needed — that's over the approved figure of up to $1.75 billion, of which $1.65 billion has been borrowed to date.
The massive borrowing is not unprecedented. The province borrowed just under two billion during the global financial crisis of 2008-09 and $2.75 billion in 2001-02, according to the department.
Despite the current economic pressures, Casey said there is hope for the future once the effects of the pandemic ease.
"When lockdown measures were eased this summer, economic activities started to rebound, however some sectors will be slower in that recovery, such as tourism and exports," she said.
Department officials said COVID-19 had reduced the size of the provincial economy by about $2.3 billion or 4.8 per cent in 2020, and in 2021 it will be about $1.7 billion smaller than anticipated in last February's budget estimates.
Despite the forecast growth for next year, officials said levels would not approach those seen in 2019 meaning the recovery would continue well into 2022.
Tim Houston, leader of the Opposition Progressive Conservatives, said the economic outlook will require a detailed recovery plan from the government.
"Every economy has been hit by COVID, but now is the time to be looking for what's next," Houston said in an interview.
He said he'd especially like to see plans to help the tourism sector recover once people start travelling again and also measures to spur manufacturing in order to make the province more self-sufficient.
This report by The Canadian Press was first published Dec. 17, 2020.
Keith Doucette, The Canadian Press