For the month of January the deficit of CAD2.1 billion was wider than the prior year's CAD0.9 billion. Deficits over each of the last seven months have been bigger than the previous year, at a time of weak economic growth and higher unemployment. Finance Minister Chrystia Freeland has said the next budget on April 16 will again focus on the country's housing squeeze and she wants to help create conditions where Governor Tiff Macklem can lower the highest borrowing costs in decades.
Freeland's fall update projected a CAD40 billion deficit for the fiscal year that began last April 1 equal to 1.4% of GDP. The shortfall for the fiscal year starting next month was estimated at CAD38 billion or 1.3% of GDP. While deficits are much smaller than the U.S. some experts question why Canada's fiscal policy isn't tighter following a strong Covid economic rebound. (See: MNI INTERVIEW:Spending Remains Too Hot For BOC-Ex Govt Adviser)
The Liberal government continues to miss its own fiscal "anchors" and remains under pressure from the NDP for new spending under a deal where the NDP helps keep Justin Trudeau in power until 2025 when his regular four-year mandate ends. The government also has an elevated cash stockpile of CAD85 billion, versus CAD46 billion before the pandemic.
