Those numbers are drastically different from the $3.9-billion and $2.4-billion shortfalls forecast just three months ago.
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Morneau’s announcement will come as the new Liberal government tries to find ways to fulfil big-ticket spending election promises amid tough economic conditions that are slashing billions from its bottom line. Then, Finance Minister Bill Morneau, shirtsleeves rolled up, stepped in to promise an undeterred Liberal government will use stimulus spending to save the day. He said the current price stands at $31.50 per barrel.
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.
The Liberal government will deliver a federal budget March 22 expected to forecast a deficit of potentially $25 billion or more and contain additional stimulus measures, as a deteriorating economy and billions in new spending erode federal finances and produce a gusher of red ink.
The Prime Minister Justin Trudeau has recently admitted that the Liberals were not going to achieve their goal of maintaining the 2016-2017 deficit to below $ 10 billion.
Aaron Wudrick, the federal director of the CTF, said the larger than expected deficit is another reason “to refuse a taxpayer bailout for beleaguered aerospace company Bombardier”.
“Our starting point is much further back than we thought”, Morneau said Monday. The request is believed to be $1.3 billion.
Morneau said the government will post a smaller-than-projected deficit of $2.3 billion for 2015-16, down from the $3-billion deficit projected in November’s fall fiscal update.
The revised outlook is based on the average projected oil price of $40 for 2016, down from $54 in the government’s fall update.
The Finance Department said the fiscal projections are also about $2 billion lower per year because recent developments have been accounted for, including the Liberals’ changes to the income-tax brackets and Canada’s operations in the Middle East.
This morning, Morneau gave an economic update at a townhall event in Ottawa, as part of his pre-budget consultations.
Among Group of Seven economies, Canada has sustained the biggest economic shock from the drop in the price of oil, a top Canadian export.
And deficits? They’re about to get a lot bigger.
Monday’s release, less extensive than the government’s annual fall updates, comes amid numerous downgraded growth forecasts for Canada, which has been hit particularly hard by the steep slide in oil prices.
To help revive the economy, the Liberal government is counting on an increase in investment in infrastructure, changes in tax brackets to help the middle class and adjustments to child benefits.
Trudeau’s government has instead been emphasizing its other key promise to continue lowering Canada’s debt-to-GDP ratio during its mandate.
BMO Capital Markets released a research note Monday that says the deficit could reach upwards of $30 billion in 2016-17.
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But it’s unlikely Bill Morneau will commit to a firm number, when he addresses the country on Monday.
