Canada on Tuesday cut its deficit forecast for this fiscal year and pledged new funds to fight the Omicron coronavirus variant, while spending promised in this year’s election campaign would likely be put in a full budget early next year.
In a fiscal update, the finance ministry forecast the deficit would be C$144.5 billion in fiscal 2021/22, down 6.6% from the C$154.7 billion forecast in April, as tax revenues increased and less emergency aid was used.
“There is some spending that we didn’t know we would need to undertake when we presented the budget,” said Finance Minister Chrystia Freeland.
“But the reality is also the performance of the economy has been more robust than we forecast. The economy is stronger.”
The government of Prime Minister Justin Trudeau provided few details on a campaign promise of C$78 billion in fresh spending on everything from new housing to electrical vehicle rebates.
“This is not the master plan for the Canadian economy going forward. That will be in the budget,” Freeland told reporters in a news conference that was hastily switched to virtual after two of her staffers tested positive for COVID-19.
Economists said they expect at least some of that new spending to show up in the budget, early next year.
“I interpret this as a pause as opposed to a pivot,” said Rebekah Young, director of fiscal & provincial economics at Scotiabank. “They have not offered up as much spending as they promised earlier this summer but that’s still likely in the pipeline.”
The government did set aside C$4.5 billion toward the potential cost of responding to the Omicron variant, along with C$5 billion to help British Columbia recover from floods last month that destroyed roads and crippled rail access to a key port.
It also slashed its forecast for 2021 real gross domestic product to 4.6% from 5.8% in April’s budget, citing global supply chain disruptions. It revised up growth estimates for 2022 and 2023.
INFLATION HOT SEAT
Freeland dodged questions when asked how the government planned to “attack” hot inflation, saying it was a global issue. The finance ministry revised up its inflation forecast for the current year to 3.3% and to 3.1% in 2022.
The Bank of Canada has said it expects inflation to stay hot into 2022, returning closer to its 2% target in the second half of the year. Inflation hit an 18-year high at 4.7% in October, with November’s print due on Wednesday at 8:30 a.m. (1330 GMT).
Conservative opposition leader Erin O’Toole accused the Liberal government of stoking inflation “instead of delivering a plan to combat the cost of living crisis and secure our country’s recovery”.
But, Freeland promised measures to address housing affordability were coming and said inflation remains a priority.
“I would say climate change, housing, affordability, growth and competitiveness, these are things we are committed to working on,” she said, adding the government remains committed to reducing the federal debt-to-GDP ratio over the medium-term.
She declined to comment on whether the tens of billions in campaign promises to be detailed in the next budget would hit future deficit projections.
The lack of details on future spending was cause for concern for some economists, who worry about the massive C$346.0 billion already spent on direct COVID-19 response and supports.
“I think the fiscal track might be more challenging than someone would look at today,” said Robert Asselin, senior vice president of policy at the Business Council of Canada.
Canada‘s debt-to-GDP ratio is now forecast to be 48.0% in 2021/22, versus 51.2% seen in April, falling to 44.0% in 2026/27.
($1 = 1.2852 Canadian dollars)
(Reporting by Julie Gordon and David Ljunggren in Ottawa, additional reporting by Steve Scherer in Ottawa and Fergal Smith in Toronto, editing by David Gregorio)
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
