P.E.I.'s economy is still growing and jobs are up, but there are 'storm clouds on the horizon'
Prince Edward Island’s economy is still growing and remains one of the strongest in Canada, but an economist says there are signs of trouble ahead.
GDP grew 2.8% last year, but that pace is slowing after years of stronger growth
'The general situation is pretty good,' Moncton-based economist David Campbell says of P.E.I.'s economy, though he warns that growth has slowed.(CBC)
Prince Edward Island’s economy is still growing and remains one of the strongest in Canada, but an economist says there are signs of trouble ahead.
The province’s deputy minister of finance and affordability, Denise Lewis Fleming, said P.E.I.’s economy has slowed, but it is still doing better than many other parts of the country.
“There are other provinces in this country that have been hit much harder by the results of the U.S. tariffs, like when you think of the steel and auto worker industry, Ontario is heavily dependent upon that and has felt it more,” Lewis Fleming told MLAs at a recent legislative standing committee meeting.
“Our economic growth is at the top of Canada. Yes it has slowed, but we’re not slipping into the same place.”
- P.E.I.'s aging population puts an economic burden on younger Islanders, advocates say
- Video
What a first-of-its-kind report reveals about P.E.I.'s economic health
David Campbell, president of Moncton-based Jupia Consultants, said the latest Statistics Canada data also shows P.E.I. is continuing to perform well.
Preliminary figures for gross domestic product by industry show the Island had the second-fastest economic growth rate among provinces and territories last year, behind Newfoundland and Labrador.
P.E.I.’s GDP grew to $7.9 billion in 2025, an increase of about 2.8 per cent over 2024.
But Campbell said the pace of growth has changed — in 2021, for example, the Island’s economy grew by 7.8 per cent.
One of the biggest questions facing P.E.I.’s economy, Campbell said, is what happens with the province’s population.
After several years of strong gains driven largely by international migration following the pandemic, P.E.I. has now seen its population decline for three consecutive quarters since July of last year, according to Statistics Canada’s first-quarter 2026 estimates.
The data shows more newcomers are leaving the province than arriving, all while deaths continue to outnumber births in a province already facing an aging population.
GDP by industry growth rates for P.E.I.
Annual percentage growth rate of Prince Edward Island’s real gross domestic product, chained to 2017 dollars, over a five-year period from 2021 to 2025.
0.0%1.0%2.0%3.0%4.0%5.0%6.0%7.0%5.0%2.9%3.9%7.8%2.8%
Source:Statistics Canada(Thinh Nguyen/CBC)
“The decline in population, it's been a very small decline, but … that is concerning,” Campbell said.
“A large part of your GDP is associated with household spending, and if you have a population that stops growing and actually slips into decline, that’s going to definitely impact your GDP growth.”
Campbell noted that the labour market still looks healthy. Total employment in May was up by about 4,500 jobs compared to May 2025, and the unemployment rate dipped slightly over the same period.
“I would say the general situation is pretty good, but there’s some storm clouds on the horizon,” he said.
Key industries facing challenges
Construction was the biggest driver of the growth. The sector grew by 18.3 per cent last year, following a 16.2 per cent increase in 2024 as the Island continues to see significant building activity.
Biosciences also saw major growth in 2025, with chemical manufacturing — including pharmaceutical and medicine manufacturing — increasing by 26 per cent. It was the fourth consecutive year of growth for that sector.
WATCH | Farm incomes on P.E.I. dropped last year by 34 per cent, or about $37M:
Farm incomes on P.E.I. dropped last year by 34 per cent, or about $37M
June 2| Duration2:10
After several years of growth, new numbers show P.E.I. farms were hit hard in 2025 by rising costs and an historic drought. CBC’s Connor Lamont has the story.
Tourism has continued to do well since the pandemic and appears to be off to a strong start this year, Campbell said.
But other key industries have faced challenges.
Food manufacturing declined in 2025, while Campbell pointed to climate pressures, including last summer’s historic drought across the Maritimes, as one factor affecting agriculture.
The oyster industry is also facing an ongoing crisis as two diseases continue to devastate populations of the shellfish.
'Work with the assets you have'
Another concern is the province’s growing debt.
Two major credit rating agencies recently changed P.E.I.’s outlook from "stable" to "negative," pointing to the province’s record $410-million deficit and rising debt.
Lewis Fleming said government will have to make difficult choices, including when it comes to infrastructure spending.
“We may have to live a little bit longer with older infrastructure," she said. "As much as people want new and replaced, that’s the other reality that we are facing.”
- P.E.I. government projects $410M deficit, warns of tough choices ahead
- With budget release, P.E.I. auditor general says government is 'in a bad situation right now'
Campbell agrees P.E.I.’s financial situation is a concern, noting that large deficits across the Maritime provinces will limit government spending in the future.
He added that P.E.I.’s provincial sales and income tax rates are already high compared to many other provinces.
“They don’t have a lot of room to raise taxes."
Campbell said the province will need to continue finding ways to attract investment in key areas such as aerospace and biosciences while keeping its finances under control.
Sustainable growth has to come from the private sector, he said, pointing to recent data showing private-sector GDP on P.E.I. growing at a higher rate than the public sector.
“We need to continue to see that into the future,” he said.
WATCH | P.E.I.'s auditor general has repeatedly raised concerns about the province's growing debt:
P.E.I.'s auditor general has repeatedly raised concerns about the province's growing debt
April 20| Duration6:10
The Lantz government released its latest capital budget, last week, projecting a $410 million deficit. By the end of this year, P.E.I.’s total debt is on track to reach $4.5 billion. For reaction and analysis, CBC News: Compass host Louise Martin speaks with Auditor General Darren Noonan.
Looking ahead, Campbell said P.E.I. cannot count on the kinds of large-scale projects that are now drawing investment nationally, such as mining and major energy developments, because those sectors have a very limited presence on the Island.
“You've got to work with the assets you have, continue to look at the food economy and trying to grow that or add value to that, continuing on with the tourism industry trying to grow … higher value jobs in biosciences and information technology, in value-added manufacturing,” he said.
“In many ways P.E.I. has to do a heavier lift than other provinces, because it can't rely on digging holes in the ground and pulling out minerals.”
He said population growth must also remain a priority.
“We should have a conversation about what's the appropriate level of population growth,” he said. “But to bring it back to zero, or even decline, it's just a recipe for disaster.”
With files from Wayne Thibodeau
