Balanced budget to take year longer
OTTAWA, Ont.—Canada will miss its deficit targets in each of the next four years because global economic weakness has carved into commodity prices and tax revenues, Finance minister Jim Flaherty said today.
His fall economic update showed a bottom line worse than many expected, with the deficit at $26 billion, up $5 billion from the March budget forecast.
“Canada has clearly been affected by volatile and falling world commodity prices since the budget in late March,” he said in notes for a speech to a Fredericton business audience.
“And the forecast of private-sector economists is consistent with the view that world commodity prices will remain below the level anticipated at the time of the budget.”
Because of the weakness, the government expects revenues to be, on average, $7.2 billion below what it had counted on in the budget during the five-year horizon period.
Flaherty made clear he remains on track in keeping government costs down.
Program expenses edged down as a percentage of the country’s gross domestic product during the period.
But the numbers show the government can’t overcome the lower revenues, which first were noticed in the final accounts of last year’s budget period.
They carry on this year and into future years.
Ottawa now projects its deficit will rise to $26 billion this fiscal year, which ends in March, as opposed to the predicted $21.1 billion.
Going forward, the deficit now is projected at $16.5 billion next year, compared with the budget estimate of $10.2 billion, and $8.6 billion in 2014-15, as opposed to $1.3 billion.
The March budget anticipated a $3.4-billion surplus in 2015-16, but now Flaherty expects a $1.8-billion deficit that year.
The new calculation is that Ottawa finally will show a surplus of $1.7 billion in 2016-17.
The projections do include a $3-billion margin of error, or so called “risk adjustment,” so it is possible that Ottawa still could come in on target if those risks do not materialize, or if the economy performs better than expected.
In his speech, Flaherty cautioned that the world is full of risks and again expressed concern about a U.S. fiscal crisis if Congress and re-elected President Barack Obama cannot come to an agreement before Jan. 1.
But he also said there is some cause for optimism, in which case both the Canadian economy and government finances will improve.