What’s the recipe for economic growth in Atlantic Canada?

Last fall, the federal government created the Atlantic Economic Panel, a group of seven business leaders with strong private-sector credentials tasked to “help chart a strong economic future for Atlantic Canada.” This is a worthy mission. According to research published by the Fraser Institute, the Atlantic provinces trail their peer jurisdictions in Canada and the United States when it comes to economic growth, incomes and living standards.

In advance of the panel’s final report (expected in September), we presented a policy framework to the panel grounded in data and based on what’s worked to drive growth in other jurisdictions. With the right policy environment, there’s no reason Atlantic Canada cannot become one of the most prosperous regions in the country or indeed the world.

It’s important to understand that government’s role is to create the right institutional environment for growth. But entrepreneurs, investors and innovators are better able to identify opportunities. This is an organic process—some endeavours will succeed, others will fail, but government cannot pre-identify or preplan opportunities in advance. In other words, governments should enact policies that provides the proper incentives for private-sector firms to capitalize on opportunities and increase prosperity for all, without getting in the way.

How do we get there?

As presented to the panel, our research has identified five policy levers that governments in Atlantic Canada should use to drive growth.

First, they must address Atlantic Canada’s uncompetitive taxes. Individuals and businesses in the region face some of the highest taxes in North America, and this is true for low-, medium- and high-income earners, and small and large businesses. Taxes reduce incentives for the types of activities the region needs most: investment, innovation, entrepreneurial activity and participation in the labour market. High taxes also discourage workers and businesses from coming here in the first place.

Second, governments must change course on fiscal policy. All four provincial governments forecast historically-large budget deficits this year and in future years with no plans to return to budget balance. This gives rise to several negative consequences including a spike in government debt and associated debt-interest costs, and likely higher taxes in the future to pay down debt.

The government footprint in Atlantic Canada continues to be among the largest in Canada. This reduces the space for private-sector activity and makes government a competitor for labour and capital. Research has shown that jurisdictions tend to maximize economic growth when government is between 26 and 30 per cent of the economy. Each Atlantic Province is well above this range, and in most cases, more than double. Governments in the region must get serious about spending control, balanced budgets and right-sizing their bloated payrolls.

Third, regulatory reform is key to improving the region’s investment climate and increasing economic growth. Businesses routinely point to the regulatory burden as a barrier to growth and investment. The Atlantic provinces can learn from other jurisdictions and their successful regulatory-reduction initiatives, which spurred robust growth.

While governments should not prioritize specific sectors, natural resources provide a window into the scale of the opportunity in regulatory reform. Atlantic Canada sits on billions of dollars of economic opportunities in the oil, gas and mining sectors, all of which pay top wages. Yet investors in these industries consistently point to regulatory duplication, uncertainty and needless bureaucracy as barriers to investment in the region.

Fourth, and In a similar vein, liberalizing trade can drive growth by allowing capital and talent to flow freely into the region. While some provinces have advanced one-off agreements to open up trade with other provinces, full mutual recognition of standards across the region and country is the best option to maximize growth. This means a nurse or a trucker, licensed in Nova Scotia, can work freely in any other province without the barrier and costs of a different regulatory regime. The good news is that the Atlantic provinces can act alone on this, with enormous potential benefits. One leading report from 2025 estimated a $14.7 billion boost to regional GDP due to full liberalized trade within the region, stemming largely from increased productivity of between 4.4 and 22.4 per cent, depending on the province.

Lastly, governments must improve the entrepreneurial environment. While the region has many entrepreneurial success stories, entrepreneurs often face an uphill climb due to government policy. Governments should level the playing field, which means competitive taxation relative to peer jurisdictions and an end to the subsidy game, which favours certain businesses over others. Governments should also remove barriers that make it difficult or more costly to open a business, barriers to free exchange, and maintain an openness to newcomers who disproportionately start businesses.

Other provinces, states and countries have shown the path for economic success: tax competitiveness, right-sizing government, smart lean regulation, free trade, and a healthy entrepreneurial environment. By enacting this policy mix, governments in Atlantic Canada can help deliver higher living standards for Atlantic Canadians.