Province Of New Brunswick 18-K/A Annual report (foreign governments) (amended)

 

Department of

Finance

Economic and Fiscal Update

Second Quarter Projections

2015-2016

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Economic and Fiscal Update

Second Quarter Projections

2015-2016

Published by:

Department of Finance

Government of New Brunswick

P.O. Box 6000

Fredericton, New Brunswick

E3B 5H1

Canada

Internet: www.gnb.ca/finance November 2015

Translation:

Translation Bureau, Government Services

ISBN 978-1-4605-0506-9

Think Recycling!

 

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2015 Economic Update
	·	The International Monetary Fund (IMF) is forecasting global economic growth of 3.1 per cent in 2015. This is a downgrade from its forecast in the July edition of its World Economic Outlook.
	·	U.S. real GDP increased at an annual rate of 3.9 per cent in the second quarter of 2015, which represents an improvement over first quarter activity. Despite recent improvement, growth for the year remains below initial projections.
	·	According to Statistics Canada, economic activity at the national level declined during the first five months of the year. A decline in oil prices has undermined positive expectations regarding investment and exports.
	·	The Department of Finance now projects real GDP growth for New Brunswick of 1.3 per cent for 2015. This is consistent with the consensus among private sector forecasters.
	·	The current forecast reflects weaker growth at the national and global level, a decline in manufacturing sales, slower-than-expected growth in investment and continued weakness in the labour market.
	·	Some positive drivers remain and include growth in income and retail sales, as well as a supportive exchange rate.
	·	Exports (-2.8%) and manufacturing (-7.8%) have both weakened in recent months. Wood products manufacturing remains a bright spot, posting growth of 4.1%.
	·	Three-quarters of the way through 2015, employment is down by 1.0 per cent over the year prior. Weakness remains concentrated in the goods sector (-6.0%), while growth in the services- producing sector has been modest (+0.4%).
	·	Despite weak employment conditions, average weekly earnings are up 3.1 per cent on a year-to-date basis - above the national growth rate of 2.2 per cent.
	·	Consumer spending continues to show improvement, with retail trade up 2.3 per cent on a year-to-date basis. Excluding gasoline station sales, retail trade is up 5.5 per cent.

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2015-2016 Fiscal Update

Based on second quarter information, there is a projected deficit of $453.1 million for 2015-2016. This is an improvement of $23.7 million compared to the budget deficit of $476.8 million.

Net debt is projected to increase by $569.0 million, an improvement of $16.5 million from budget. Net debt is projected to reach $12,991 million by March 31, 2016.

Revenue:

Revenue is $37.1 million higher than budget. The major variances include:

· Personal Income Tax is higher by $34.0 million attributable to an anticipated underpayment for the 2014 taxation year, which also positively impacts the forecast base for 2015. This counteracts weakness in the economy.

· Miscellaneous Revenue is up $11.8 million mainly due to increased revenue from the Regional Health Authorities.

· Provincial Real Property Tax is up $10.0 million due to base improvements in the previous year.

· Gasoline and Motive Fuels Tax is up $7.8 million due to higher than anticipated gasoline volumes.

· Conditional Grants are up $5.0 million predominantly due to federal recoveries for Disaster Financial Assistance.

· Tobacco Tax is up $4.2 million as a result of stronger than anticipated volumes.

· Return on Investment is down $33.3 million primarily as a result of lower projected net income for NB Power. This is mainly due to unanticipated generation station outages, low water levels for hydro-electric power generation and investment market volatility.

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Expense:

Total expenses were $13.4 million higher than budget.

The major variances include the following:

· General Government ($7.0 million over): Mainly due to higher than budgeted expenses under Revenue Sharing Agreements with First Nations.

· Opportunities New Brunswick ($5.5 million under): Mainly due to lower than anticipated financial assistance to companies.

· Public Safety ($12.3 million over): Due to higher than budgeted expenses under the Disaster Financial Assistance program associated with storm and flood events that occurred in 2014, as well as costs associated with damages from the heavy rain event in the fall of 2015. These expenses are partially offset by increased recoveries from the federal government.

· Social Development ($7.9 million over): Mainly due to higher than anticipated program delivery costs and the previously announced changes with respect to nursing home funding policies. These increased costs are partially offset by savings in other areas.

· Tourism, Heritage and Culture ($2.4 million over): Due to costs associated with the completion of an archaeological impact assessment for the proposed Sisson Mine project.

· Special Operating Agency Account ($5.7 million under): Mainly due to lower than anticipated expenses in the Regional Development Corporation Special Operating Agency due to project timing changes from budget.

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PROVINCE OF NEW BRUNSWICK

FISCAL UPDATE

Thousands

$

	2015-2016 Budget			2015-2016 1st Quarter Projection			2015-2016 2nd Quarter Projection			Variance from Budget
Revenue
Ordinary Account		7,984,551			7,991,662			8,023,185			38,634
Capital Account		10,705			8,424			8,424			(2,281	)
Special Purpose Account		61,342			61,104			63,006			1,664
Special Operating Agencies		57,634			57,251			56,762			(872	)
Sinking Fund Earnings		193,700			193,700			193,700			0
Total Revenue		8,307,932			8,312,141			8,345,077			37,145
Expense
Ordinary Account		8,007,021			8,005,301			8,029,174			22,153
Capital Account		82,903			85,067			80,595			(2,308	)
Special Purpose Account		74,228			74,205			74,297			69
Special Operating Agencies		53,372			52,512			47,638			(5,734	)
Amortization of Tangible Capital Assets		417,238			415,652			416,507			(731	)
Total Expense		8,634,762			8,632,737			8,648,211			13,449
Contingency Reserve		(150,000	)		(150,000	)		(150,000	)		0
Surplus (Deficit)		(476,830	)		(470,596	)		(453,134	)		23,696

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CHANGE IN NET DEBT

Thousands

$

	2015-2016 Budget			2015-2016 1st Quarter Projection			2015-2016 2nd Quarter Projection			Variance from Budget
Net Debt - Beginning of Year		(12,018,306	)		(12,018,306	)		(12,421,892	)		(403,586	)
Changes in Year
Surplus (Deficit)		(476,830	)		(470,596	)		(453,134	)		23,696
Investments in Tangible Capital Assets		(525,898	)		(528,911	)		(532,325	)		(6,427	)
Amortization of Tangible Capital Assets		417,238			415,652			416,507			(731	)
(Increase) Decrease in Net Debt		(585,490	)		(583,855	)		(568,952	)		16,538
Net Debt - End of Year		(12,603,796	)		(12,602,161	)		(12,990,844	)		(387,048	)

At second quarter, Net Debt - Beginning of Year has been updated to reflect the ending net debt that was published in the 2014-2015 Consolidated Financial Statements (Public Accounts Volume I).

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APPENDIX A

ORDINARY ACCOUNT REVENUE BY SOURCE

Thousands

$

	2015-2016			2015-2016 1st Quarter			2015-2016 2nd Quarter			Variance from
	Budget			Projection			Projection			Budget
Taxes
Personal Income Tax		1,587,000			1,582,000			1,621,000			34,000
Corporate Income Tax		258,000			258,000			258,000			0
Provincial Real Property Tax		488,100			498,100			498,100			10,000
Harmonized Sales Tax		1,184,200			1,184,200			1,184,200			0
Gasoline and Motive Fuels Tax		268,200			270,200			276,000			7,800
Tobacco Tax		135,800			135,800			140,000			4,200
Pari-Mutuel Tax		600			600			420			(180	)
Insurance Premium Tax		53,546			53,546			52,229			(1,317	)
Real Property Transfer Tax		12,000			12,000			13,000			1,000
Financial Corporation Capital Tax		27,000			27,000			27,000			0
Penalties and Interest		13,000			13,000			13,000			0
Subtotal - Taxes		4,027,446			4,034,446			4,082,949			55,503
Return on Investment		295,765			283,160			262,481			(33,284	)
Licences and Permits		148,333			148,019			147,902			(431	)
Sale of Goods and Services		325,187			324,221			323,120			(2,067	)
Lottery and Gaming Revenues		140,300			139,900			141,900			1,600
Royalties		107,230			107,230			105,830			(1,400	)
Fines and Penalties		8,165			8,165			8,178			13
Miscellaneous		61,189			72,407			73,035			11,846
Total - Own Source Revenue		5,113,615			5,117,548			5,145,395			31,780
Unconditional Grants – Canada
Fiscal Equalization Payments		1,668,900			1,668,900			1,668,900			0
Canada Health Transfer		717,800			717,800			719,900			2,100
Canada Social Transfer		273,400			273,400			272,900			(500	)
Other		1,866			1,866			1,866			0
Subtotal - Unconditional Grants – Canada		2,661,966			2,661,966			2,663,566			1,600
Conditional Grants – Canada		219,252			222,143			224,219			4,967
Total - Grants from Canada		2,881,218			2,884,109			2,887,785			6,567
Subtotal		7,994,833			8,001,657			8,033,180			38,347
Inter-account Transactions		(10,282	)		(9,995	)		(9,995	)		287
Ordinary Account Revenue		7,984,551			7,991,662			8,023,185			38,634

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APPENDIX B

ORDINARY ACCOUNT EXPENSE

Thousands

$

	2015-2016			2015-2016 1st Quarter			2015-2016 2nd Quarter			Variance from
	Budget			Projection			Projection			Budget			%
DEPARTMENT
Agriculture, Aquaculture and Fisheries		37,495			37,495			37,495			0			0.0	%
Education and Early Childhood Development		1,118,623			1,118,623			1,118,623			0			0.0	%
Energy and Mines		8,617			8,617			8,617			0			0.0	%
Environment and Local Government		139,381			139,381			139,381			0			0.0	%
Executive Council Office		19,148			19,038			19,023			(125	)		-0.7%
Finance		17,282			17,182			17,132			(150	)		-0.9%
General Government		554,951			553,619			562,001			7,050			1.3	%
Government Services		53,657			53,657			53,657			0			0.0	%
Health		2,596,039			2,596,039			2,596,039			0			0.0	%
Human Resources		3,421			3,421			3,421			0			0.0	%
Justice		42,491			42,491			42,491			0			0.0	%
Legislative Assembly		21,721			21,721			21,721			0			0.0	%
Natural Resources		93,267			93,267			93,267			0			0.0	%
Office of the Attorney General		17,975			17,975			18,299			324			1.8	%
Office of the Premier		1,616			1,616			1,616			0			0.0	%
Opportunities New Brunswick		50,883			45,215			45,429			(5,454	)		-10.7%
Other Agencies		259,387			258,446			259,914			527			0.2	%
Post-Secondary Education, Training and Labour		613,793			613,793			613,793			0			0.0	%
Public Safety		166,262			171,563			178,547			12,285			7.4	%
Regional Development Corporation		65,012			65,012			65,012			0			0.0	%
Service of the Public Debt		685,000			685,000			685,000			0			0.0	%
Social Development		1,113,693			1,115,218			1,121,593			7,900			0.7	%
Tourism, Heritage and Culture		52,382			54,802			54,802			2,420			4.6	%
Transportation and Infrastructure		296,942			296,942			296,942			0			0.0	%
Subtotal		8,029,038			8,030,133			8,053,815			24,777			0.3	%
Investment in Tangible Capital Assets		(11,735	)		(14,837	)		(14,646	)		(2,911	)		24.8	%
Inter-account Transactions		(10,282	)		(9,995	)		(9,995	)		287			-2.8%
Ordinary Account Expense		8,007,021			8,005,301			8,029,174			22,153			0.3	%

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APPENDIX C

CAPITAL EXPENDITURES

Thousands

$

	2015-2016 Budget			2015-2016 1st Quarter Projection			2015-2016 2nd Quarter Projection			Variance from Budget
Regular Capital Investments
Agriculture, Aquaculture and Fisheries		900			500			900			0
Education and Early Childhood Development		77,111			76,129			76,277			(834	)
Environment and Local Government		1,000			1,000			1,000			0
Health		58,900			57,021			55,456			(3,444	)
Legislative Assembly		735			735			735			0
Natural Resources		1,510			1,510			1,510			0
Post-Secondary Education, Training and Labour		5,600			5,820			5,820			220
Regional Development Corporation		5,668			5,668			5,668			0
Tourism, Heritage and Culture		1,437			1,437			1,437			0
Transportation and Infrastructure		329,578			324,617			330,684			1,106
Regular Capital Investments		482,439			474,437			479,487			(2,952	)
Strategic Infrastructure Initiative
Education and Early Childhood Development		16,250			16,891			15,924			(326	)
Health		1,300			1,300			350			(950	)
Regional Development Corporation		3,500			3,500			2,500			(1,000	)
Tourism, Heritage and Culture		1,127			563			563			(564	)
Transportation and Infrastructure		70,610			70,610			70,610			0
Energy Retrofit and Renewable Energy		11,840			11,840			11,840			0
New Strategic Projects		10,000			10,000			7,000			(3,000	)
Strategic Infrastructure Initiative		114,627			114,704			108,787			(5,840	)
Total - Capital Expenditures		597,066			589,141			588,274			(8,792	)
Investments in Tangible Capital Assets		(514,163	)		(504,074	)		(507,679	)		6,484
Capital Account Expense		82,903			85,067			80,595			(2,308	)

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