Those forecasts exclude spending plans to be unveiled in the March 22 budget, so the overall deficit will be several billion dollars higher than the figures released on Monday.
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Growth in 2016 would be 1.4 per cent, down from the 2.0 per cent forecast used in the finance department’s last budget update in November, said Morneau, relying on an average of private sector economists’ forecasts.
The government is also predicting a $15.5 billion deficit in 2017-2018 which is more than six times last falls estimate of $2.4 billion.
Morneau, who will discuss the situation at an Ottawa community centre Monday as part of his pre-budget consultations, is also scheduled to appear Tuesday before the House of Commons finance committee.
The release, less extensive than the government’s annual fall updates, will come amid waves of downgraded growth forecasts for Canada, which has been hit particularly hard by the steep slide in oil prices and the weakened global economy.
“We fully agree that a moderate dose of stimulus is an entirely appropriate response to current economic realities, but we would counsel caution in minding the dosage”, BMO said, warning “overly aggressive” measures could do lasting damage to Canada’s finances and pose a risk to the country’s triple-A credit rating.
Prime Minister Justin Trudeau promised a renewed relationship with First Nations, Métis and Inuit peoples in Canada, but much of the focus in recent weeks has been on the upcoming national inquiry on missing and murdered indigenous women and girls.
“If you go back to budget 2015 and you say, ‘How big was the economy?’ they were projecting for 2016 for the economy to be at $2.1 trillion, and now if you go to Minister Morneau’s document he is saying it is going to be less than $2 trillion”, said Page.
That $18-billion dollar figure doesn’t account for the other billions the federal Liberals have promised in spending, including infrastructure in B.C.
But the decision to show a bigger deficit forecast could also make it easier for the Liberals to score political points by beating expectations.
The official, speaking on condition of anonymity, says the unusual step is meant to be a way of being more transparent with Canadians about the economic situation. “Our government believes strongly that the economic downturn makes our plan to grow the economy even more relevant than it was a few short months ago”.
This is nearly five times the $3.9 billion projection three months ago.
Trudeau also raised doubts whether the Liberals would fulfil its vow balance the books within four years – a central pledge in their election platform.
The government projects that budgetary revenues have decreased by about $11 billion per year, on average, for 2016-17 and 2017-18, compared to its fall fiscal update delivered last November.
The government’s own fiscal update shows the ratio may actually increase in 2016-17 (compared to 2015-16) but then drop the following year.
Today’s fiscal update includes a $6 billion a year contingency – double the $3 billion Ottawa used in past projections.
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2017-18: 2.2 per cent, equal to 2.2 per cent.
