The implementation of the harmonized sales tax on P.E.I. is expected to take a bit of the sting out economic weakness that is expected to hit the region.
The Atlantic Provinces Economic Council issued a news release this week saying ongoing economic weakness continues to weigh on the region’s fiscal prospects.
All four Atlantic provinces are forecasting an increase in current year deficits and three of the four of the four anticipate delays in returning to fiscal balance.
“Economic weakness is contributing to lower revenues and increased fiscal deficits this year,’’ said APEC president Elizabeth Beale, who noted that all four Atlantic provinces increased their projected deficits by a combined $712 million in their fall fiscal updates.
In addition, the federal government revised its projected deficit upwards for 2012-13 by $5 billion.
However, APEC’s Atlantic Report, which was released on Wednesday, noted that the HST is forecast to increase revenues on P.E.I. by $25 million.
It’s also expected to pump $4 million back into the pockets of Island farmers since it will put those in the agriculture sector on a level playing field with everyone else in the region.
Beale said the region’s economic weakness is also leading to delays in returning to fiscal balance. The federal government is now planning to return to balance by 2016-17, one year later than planned in Budget 2012.
Nova Scotia is currently maintaining its commitment to return to balance in 2013-14 with the three other Atlantic provinces forecasting balanced books by 2014-15.
“Facing wage and other spending pressure, provinces will need to be vigilant in ensuring previously announced spending restraint is achieved,’’ Beale said. “Measures to restrain spending are underway at the federal level and in most Atlantic provinces.’’
Beale also highlighted that changes to a number of federal transfer programs could affect Atlantic Canada in 2014. These include the expiry of labour market agreements and the Building Canada Plan, along with changes to the Canada Health Transfer.