Newfoundland and Labrador is setting aside $200 million to cushion the blow of potential U.S. tariffs and other economic shocks, a move aimed at protecting jobs and businesses in the province, according to its 2025 budget released Tuesday.
The contingency fund, a first for the province, mirrors strategies adopted in other jurisdictions and is part of a broader effort to prioritize economic stability amid global uncertainty. While the government had previously targeted a balanced budget by 2025-26, that goal has now been pushed to 2026-27 to accommodate affordability measures and prepare for tariff-related fallout.
“This provides the flexibility to address economic and worker impacts,” the budget document said.
Employment to decline in 2025
Despite projecting the strongest real GDP growth in Canada this year—at 4.4 per cent—Newfoundland and Labrador’s labour market is expected to shrink. The province forecasts total employment will fall by 1.2 per cent in 2025 due to the knock-on effects of American tariffs on Canadian exports.
The unemployment rate is projected to rise to 10.8 per cent, well above the national average.
Consumer inflation is also expected to climb to 2.5 per cent, driven in part by Canadian counter-tariffs on U.S. goods. Retail sales, however, are forecast to grow modestly by 2.0 per cent, and the population is expected to rise by 0.2 per cent, largely due to in-migration.
No tax hikes, increased investment in education and health care
The $10.7 billion budget includes no new taxes or fee increases for the fourth consecutive year, with ongoing reductions still in place. Key spending areas include education and health care, with funding for more teachers, classroom technology, and seniors’ services.
Capital investment is also expected to increase in the coming years, buoyed by large projects such as the Bay du Nord offshore oil development, wind-hydrogen initiatives, and the Upper Churchill redevelopment.
Deficit falls, debt still high
The province is projecting a $372 million deficit in 2025-26—down from $1.5 billion in 2020-21—but net debt remains high at $19.4 billion. Oil royalties are forecast to comprise 15 per cent of total revenues, a steep drop from 32 per cent in 2011-12.
The borrowing requirement for the year is $4.1 billion, largely to support infrastructure development and liquidity. Newfoundland and Labrador has also entered the European capital market for the first time, following the launch of a borrowing program on the London Stock Exchange in 2024.
Historic energy deal with Québec
The budget highlights a landmark energy agreement with Québec, which includes terminating the 1969 Upper Churchill contract and replacing it with new arrangements to develop Gull Island and expand Churchill Falls. The government says the deal will generate more than $225 billion in revenue over its lifespan.
Finance Minister Siobhan Coady called the 2025 budget a continuation of efforts to modernize provincial services and strengthen the economy.
“We are leading in economic growth among Canadian provinces,” Coady said. “We are modernizing provincial services here at home and seeking out new global markets for our products and services.”
