The B.C. government says it is forecasting larger deficits over the next three years as the province faces “significant headwinds” from U.S. tariffs, the impacts of the war in the Middle East, and a tighter federal immigration policy.

The province’s First Quarterly Report, issued Monday, forecasts a deficit of $13.8 billion in 2026-27, followed by deficits of $12.7 billion in 2027-28 and $12 billion in 2028-29.

As well, it updates the forecast for real GDP growth in 2026 to 0.9 per cent, down from the 1.3 per cent forecast in Budget 2026.

The revised forecasts reflect temporary weakness in the labour and housing markets, which are expected to weigh on consumer spending and residential investment.

“B.C.’s economic performance has been mixed in the first seven months of 2026,” the report said.

The government points to the ongoing conflict in the Middle East causing disruptions to global supply chains and energy prices, pushing inflation upward.

As well, retail sales saw little growth early in the year, despite gains in wages and salaries, as economic uncertainty weighed on consumer spending, the report says.

Merchandise exports have increased slightly, despite U.S. tariffs.

“Exports to non-U.S. destinations have increased, supported by rising LNG production and higher prices for key commodities,” the report said.

“Meanwhile, exports to the U.S. are down, largely due to lower exports of softwood lumber.”

In addition, the province says it expects personal income-tax revenue to be nearly $1 billion higher over the three-year fiscal plan, in large part because of stronger household incomes and preliminary federal tax-assessment information.