Debt sustainability analysis projects government revenues and expenditures forward to explore whether debt to GDP ratios grow without bound. Fiscal gap analysis is a particular tool to quantify what fiscal adjustment, if any, is necessary to ensure sustainability of public finances. These gaps represent the required change in primary balances (as a share of GDP) to maintain net debt to GDP ratios over a desired time horizon. This tool allows you to select various scenarios governing fundamental economic, fiscal, and demographic developments as well as selected policy reforms and see the resulting effect on fiscal gaps. For more information, see Trevor Tombe, “Provincial Debt Sustainability in Canada: Demographics, Federal Transfers, and COVID-19,” (2020) Canadian Tax Journal 68:4, 1083-1122.
Notes: Federal borrowing rates are always 1 percentage points lower than provincial. All fiscal gap statistics are reported as shares of GDP and represent the fiscal adjustment required to achieve the 2019 net debt ratio by the end of the selected time horizon. Natural resource revenues projected using CER Energy Future 2021; population post-2043 are our own projections based on Statistics Canada’s, which end in 2043 for provinces. Ad-hoc adjustments are made to all projections to reflect elevated commodity prices and futures markets (as of mid-April 2022) and revised near-term GDP growth forecasts. Medium-term federal debt/GDP projections incorporate the latest information from Budget 2022. Note, the long-term and medium-term projections will differ, and depend on the specific parameter assumptions selected.