The Parliamentary Budget Officer is warning that debt among provincial, territorial and municipal governments could skyrocket out of control due to increased health care costs associated with an aging population.
“While there is a great deal of uncertainty with respect to the economy, we can be more certain about the demographic outlook, particularly the transition of the post-war ‘baby boom’ out of the labour force and into retirement,” the 2016 Fiscal Sustainability Report noted.
Net subnational debt could reach well over 200% of Canada’s GDP by 2090, the report warned. Health care spending grew faster than Canada’s GDP again in 2015 and costs are expected to make up 12.5% of Canada’s GDP by 2090.
Population growth is also expected to slow and the aging of Canadians is expected to intensify as the proportion of those 65 and over will reach 40% by 2040.
Public pension plan net cash flow could also bottom out as baby boomers cash in after retirement. According to projections by the Parlimentary Budget Officer, it will turn negative in 2018, declining to -0.6% of GDP by 2030, continuing to fall to -1.0% by 2090.
