07:46 AM EST, 03/05/2025 (MT Newswires) -- British Columbia's fiscal year 2025-26 (FY2026) budget reveals deeper-than-anticipated deficits under prudent assumptions while preparing for strong fiscal headwinds blowing from the United States, said Desjardins.

The government of Canada's province is now projecting a C$10.9 billion deficit in FY2026, which gradually narrows to C$9.9 billion in FY2028.

The updated fiscal plan is characteristically prudent, as the province continues to embed ample buffers through contingencies and conservative assumptions, noted the bank.

The government's estimated downside risks from new U.S. trade tariffs, which could result in additional annual shortfalls ranging from C$1.7 billion to C$3.4 billion due to pervasive job losses and reduced corporate profits, appear "reasonable," stated Desjardins.

Amid the financial strains caused by U.S. tariffs, the province has managed to control spending by keeping new policy measures light and targeted, pointed out the bank.

Larger projected deficits are expected to push the debt-to-GDP ratio higher, from 22.9% in FY2025 to 34.4% in FY2028. Gross borrowing requirements are now expected to total C$31.1 billion in FY2026, C$33.1 billion in FY2027 and C$34.7 billion in FY2028. For FY2026 and FY2027, the updated borrowing requirements represent a total increase of C$6.2 billion from last year's budget.

In light of a weaker revenue outlook and significant tariff impacts, B.C.'s Budget 2025 balances critical investments with a relatively manageable debt position, even as the province's debt is expected to rise as a share of the economy, according to the bank. By keeping program spending increases incremental and targeted, despite strong revenue headwinds from external factors, the budget is a step in the right direction, paving the way for further consolidation in future plans.