Atlantic Canada’s senior population will reach more than a quarter of the total population by 2043 while Alberta’s will reach 19% leading to persistent budget deficits and increased health-care spending.
These findings were released by the independent, non-partisan Canadian public policy think-tank Fraser Institute on Tuesday. The Atlantic Canada report concluded the maritime provincial finances will be in a precarious situation in the years ahead due to the economic effects of both an aging population and COVID-19. These problems will be most severe in Newfoundland & Labrador as well as all four Atlantic provinces will experience difficulties.
Similar findings in Alberta were released as seniors will continue to constitute a growing share of Alberta’s population, which will drive increases in health care spending and slow revenue growth while imposing adverse economic effects on the province. The Alberta report concludes that absent a change in current policy, the aging population will exacerbate the problem of persistent deficits that will continue to challenge Alberta’s government finances. In fact, at its current trajectory, Alberta may not see another balanced budget as well until after 2040.
The risk of future recessions, rising interest rates, and other unexpected events will only compound problems further. Ultimately, Atlantic Canada and Alberta governments will have to implement new policies in order to avoid a serious deterioration in their financial health.
Atlantic Canada Report 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.
Alberta Report Summary
- Seniors currently compose 13.8 percent of Alberta’s population, and their share of the province’s population will continue to grow and reach 19.0 percent by 2043.
- This will drive increases in health care spending and slow growth in revenues, while imposing adverse effects on the provincial economy. The risk of future recessions, rising interest rates, and other unexpected events would only compound problems further.
- Health care expenditures are estimated to increase by approximately 5.6 percent annually from now until 2040/41. Put differently, Alberta’s health care spending will increase from 6.3 percent of GDP in 2019 to 7.0 percent in 2040.
- The aging population will exacerbate challenges for Alberta government finances and projections suggest the province will not see a balanced budget before 2040 at the current trajectory.
- Alberta is expected to run primary deficits (excluding interest costs) equivalent to between 1.0 and 2.0 percent of GDP, absent a change in spending or tax policy.
According to the institute academics and pundits alike have spent much time discussing Atlantic Canada and Alberta’s relatively old and aging population. Long-term projections suggest that in the coming decades a lower proportion of Canadians will participate in the labour force and the country will experience relatively low rates of economic growth. While all of Canada is dealing with these challenges, Atlantic Canada faces some of the most difficult conditions. At the same time, Canada’s aging population is expected to result in slower-growing revenues and rising expenditures, particularly for health care.
