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CANADA: Budget Watchdog Sees Higher Near-Term Fiscal Deficits

CANADA
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  • Ahead of the government’s Fall Economic Statement likely due in November or December, Canada’s Parliamentary Budget Officer has released its updated economic and fiscal outlook (full here).
  • “Our outlook incorporates economic data up to and including October 1. It also includes new measures announced by the Government in Budget 2024 and through August 31.”
  • It estimates there was a fiscal deficit of C$46.8bn (1.6% GDP) in the previous fiscal year of 2023-24.
  • Recall that FM Freeland had pledged to keep the annual budget deficit at C$40bn or less back in Budget 2024.
  • The PBO then sees the deficit at an almost unchanged C$46.4bn for FY 24/25 (1.5% GDP), importantly “under status quo policy”. That compares with Budget 2024 penciling in C$39.8bn.
  • “Assuming no new measures are introduced, and existing temporary measures sunset as scheduled, the deficit is projected to resume its downward trajectory, falling to $22.5 billion (0.6 per cent of GDP) in 2029-30.”
  • This is a perhaps strong assumption in the near-term, with Trudeau’s Liberals party heavily lagging in polls and needing to keep minority partners on side to prevent votes of no confidence being called.
  • Debt should remain favorable when compared internationally: “PBO expects the federal debt-to-GDP ratio to be 42.2 per cent in 2023-24 and 2024-25. Assuming no new measures and existing temporary measures sunset as scheduled, the federal debt ratio is projected to fall to 39.0 per cent in 2029-30, well above its pre-pandemic level of 31.2 per cent of GDP in 2019-20.”
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  • Ahead of the government’s Fall Economic Statement likely due in November or December, Canada’s Parliamentary Budget Officer has released its updated economic and fiscal outlook (full here).
  • “Our outlook incorporates economic data up to and including October 1. It also includes new measures announced by the Government in Budget 2024 and through August 31.”
  • It estimates there was a fiscal deficit of C$46.8bn (1.6% GDP) in the previous fiscal year of 2023-24.
  • Recall that FM Freeland had pledged to keep the annual budget deficit at C$40bn or less back in Budget 2024.
  • The PBO then sees the deficit at an almost unchanged C$46.4bn for FY 24/25 (1.5% GDP), importantly “under status quo policy”. That compares with Budget 2024 penciling in C$39.8bn.
  • “Assuming no new measures are introduced, and existing temporary measures sunset as scheduled, the deficit is projected to resume its downward trajectory, falling to $22.5 billion (0.6 per cent of GDP) in 2029-30.”
  • This is a perhaps strong assumption in the near-term, with Trudeau’s Liberals party heavily lagging in polls and needing to keep minority partners on side to prevent votes of no confidence being called.
  • Debt should remain favorable when compared internationally: “PBO expects the federal debt-to-GDP ratio to be 42.2 per cent in 2023-24 and 2024-25. Assuming no new measures and existing temporary measures sunset as scheduled, the federal debt ratio is projected to fall to 39.0 per cent in 2029-30, well above its pre-pandemic level of 31.2 per cent of GDP in 2019-20.”