CANADA
- The budget deficit of C$40bn for the almost realized FY 23/24 was in line with the updated estimate from the Fall Economic Statement in Nov.
- After that, deficits drift higher than previously estimated but the deterioration is limited as a % GDP. The C$39.8bn projected for FY 24/25 was smaller than some estimates seen beforehand, and is equivalent to 1.3% GDP.
- It’s seen fading to 0.6% GDP by FY 28/29 but once again doesn’t return to balance.
- Planned spending has come in notably higher than expected (rising 6.7% this year, far faster than the economy’s potential growth) but so too have estimated revenues. There’s a risk here nominal GDP and tax receipt assumptions undershoot, prompting larger than projected deficits.
- Federal government debt is seen slowly trending lower from 42% GDP to 39% GDP in FY 28/29.
- These figures see the government meet its recently defined fiscal anchors: deficits at or below $40.1bn in FY24, declining as % GDP in FY25 and beyond (including sub-1% from FY27) and a debt ratio below 42.7% in FY25 and declining thereafter.
- With the government starting to gear up for an election footing, favourable economic and fiscal developments since the November update have been squandered with a preference for higher program spending.
- That said, sub 1.5% GDP deficits are still leagues healthier than the 6-7% GDP deficits the IMF forecasts for the US over its projection horizon.
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