The Implications of an Aging Population for Government Finances in Atlantic Canada

Summary

• Seniors currently compose a large share of Atlantic Canada’s population, and will constitute an even greater share of the region’s population in the years ahead.
• This will drive increases in health care spending and slow the growth in revenues, while imposing adverse effects on the provincial economies. The risk of future recessions, rising interest rates, and other unexpected events will only compound problems further.
• Health care expenditures are estimated to increase annually by 4.2 percent in New Brunswick, 4.7 percent in Nova Scotia, 5.1 percent in Newfoundland & Labrador, and 5.6 percent in Prince Edward Island until 2040/41.
• The aging population will exacerbate challenges for provincial government finances in the form of persistent deficits. Projections suggest that at the current trajectory the province will not see a balanced budget before 2040.
• The situation is the most severe in Newfoundland & Labrador, which projects a primary deficit of 5.3 percent of GDP in 2040 (excluding interest costs). By 2040, estimates indicate that all three Maritime Provinces will have primary deficits, to the tune of 2.3 percent of GDP in Prince Edward Island, 1.1 percent in New Brunswick, and 1.7 percent in Nova Scotia.