New Brunswick’s increased deficit likely means it won’t meet its target for a balanced budget in 2017-2018, says Moody’s Investors Service.

The credit rating agency reports that the first budget of New Brunswick’s new government, which was elected in September of last year, forecasts a $476.8 million deficit, which is equivalent to 5.7% of revenue, in 2015-2016. “This represents a material deterioration from the forecasted 2014-2015 results,” says Moody’s; noting that it is expected to produce a deficit of $255.4 million (3.1% of revenue) in 2014-2015.

The budget didn’t include a timeline for a return to balance, Moody’s notes; yet, it says that it now expects that the previous target of 2017-2018 will not be achieved. “The province indicated that returning to balanced budgets would take considerable effort, noting that a structural deficit of $400 million currently exists,” it says.

“The increase in the size of the 2015-2016 deficit and lack of sustained progress in returning to balanced budgets in recent years are credit negative,” noted Michael Yake, vice president at Moody’s, and its lead analyst for New Brunswick.

The report notes that the government is expecting to raise an additional $30 million in revenue through the introduction of two new income tax brackets for individuals earning more than $150,000 per year. And, a similar amount will be generated from increases to gas taxes.

Additionally, the province is expecting revenues to increase, as its economy improves. It forecasts GDP growth to increase from 0.8% in 2014 to 1.8% in 2015. Moody’s notes that the current real GDP growth forecast for 2014 is now lower than the 1.1% growth forecasted in the previous budget.

“We have noted in the past that the poor fiscal outcomes of New Brunswick have been tied to weak economic performance,” noted Yake. “While growth of 1.8% for 2015 is lower than previously projected in past budgets, it still represents a significant increase over 2014 and a level that has not been recorded in the province since 2010.”

Total expenditures are forecasted to grow by 1.5% in 2015-2016, Moody’s says, noting that this remains 2.5 times the rate of revenue growth. “It is expected that future budgets will lay out further constraint measures, as the government is still in the midst of a strategic program review it launched in January,” it says.