Close X
Saturday, November 23, 2024
ADVT 
National

PBO expects inflation to fall to 2% by end of year, deficit to grow amid weak economy

Darpan News Desk The Canadian Press, 05 Mar, 2024 12:29 PM
  • PBO expects inflation to fall to 2% by end of year, deficit to grow amid weak economy

The parliamentary budget officer is projecting inflation will return to the Bank of Canada's two per cent target by the end of the year and the federal deficit will grow amid weakening economic conditions. 

The budget watchdog's latest economic and fiscal outlook comes as the federal government gears up for its spring budget and Canadians eagerly wait for the central bank to begin lowering interest rates. 

The report predicts the first rate cut to come in April, slightly earlier than financial markets expect. 

The Bank of Canada is scheduled to make an interest rate announcement on Wednesday and is widely expected to hold its policy rate at five per cent.

High interest rates have weighed on the Canadian economy as consumers pull back on spending and businesses see their sales slow.

Statistics Canada reported last week that the economy eked out one per cent annualized growth in the fourth quarter. That growth was largely due to a boost in exports, supported by strong U.S. spending trends.

The PBO says the economy will likely grow by a modest 0.8 per cent this year, slightly lower than the Bank of Canada's projection of one per cent.

Meagre economic growth would weigh on government coffers, too. 

The PBO anticipates the federal deficit to grow to $46.8 billion for the current fiscal year, provided no new measures are introduced and existing temporary measures expire as scheduled.

That would exceed the federal government's fall projection of $40 billion.

The report warns that if the Bank of Canada keeps interest rates higher for longer than expected, the deficit could be even larger and the economy weaker. 

Finance Minister Chrystia Freeland announced on Monday that she will present the budget, which includes an update on the state of federal finances, on April 16.

The budget will likely be a challenging exercise for the Liberals.

The government is facing significant fiscal pressures that it will have to balance against the appetite for more action on housing. 

The budget is also an opportunity for the Liberals to try and win back Canadians who have thrown their support behind the Conservatives. 

The finance minister recently reiterated her commitment to new fiscal guardrails introduced in the fall that would limit deficits.

"For our government, it is very, very important to invest in Canada and Canadians ... and to do so in a fiscally responsible way," Freeland told reporters ahead of the introduction of pharmacare legislation last week.

"We laid out in the fall economic statement some fiscal guideposts, and we will meet them."

The federal government pledged in the fall that the current fiscal year's deficit would not get any bigger than its $40-billion projection.

According to the Finance Department, the federal deficit for the current fiscal year stood at $23.6 billion by the end of December.

The government is also looking to lower the debt-to-GDP ratio in 2024-25 relative to the projection in the fall economic statement, and keep deficits below one per cent of GDP beginning in 2026-27.

MORE National ARTICLES

Charities under strain as foreign students 'struggle' in Canada: Report

Charities under strain as foreign students 'struggle' in Canada: Report
With nearly 500,000 international students living in the Greater Toronto Area, Khalsa Aid's national director Jindi Singh says charities are taking on more than their fair share of the load, Ottawa-based CBC news channel reported.

Charities under strain as foreign students 'struggle' in Canada: Report

Indian-origin man wanted in connection with father's murder in Canada

Indian-origin man wanted in connection with father's murder in Canada
Police are on the lookout for a 22-year-old Indian-origin son, who fled after allegedly murdering his father, at their home in Canada's Ontario province. Sukhaj Cheema-Singh is wanted for first-degree murder after 56-year-old Kuldip Singh was found with 'severe injuries' at his Stoney Creek home in Hamilton on Saturday night.

Indian-origin man wanted in connection with father's murder in Canada

Jordan's King Abdullah II to visit Canada on Wednesday

Jordan's King Abdullah II to visit Canada on Wednesday
The King of Jordan will visit Canada later this week and meet with Prime Minister Justin Trudeau. The Prime Minister's Office issued a news release Sunday saying King Abdullah II will be in Ottawa on Wednesday.  

Jordan's King Abdullah II to visit Canada on Wednesday

Contract rules disregarded in costly development of ArriveCan app: auditor general

Contract rules disregarded in costly development of ArriveCan app: auditor general
Disregarded policies and a failure of management led to the development of the inordinately costly and much-maligned ArriveCan app, an investigation by Canada's auditor general has found.  The federal government launched the app in April 2020 as a way to track health and contact information for people entering Canada during the COVID-19 pandemic, and to digitize customs and immigration declarations.  

Contract rules disregarded in costly development of ArriveCan app: auditor general

Rainfall warning for Metro Vancouver

Rainfall warning for Metro Vancouver
Environment Canada has issued a rainfall warning in Metro Vancouver. It says a moist Pacific frontal system is expected to bring about 55 millimeters of rain starting Sunday and continuing overnight, before easing this morning. 

Rainfall warning for Metro Vancouver

Body found in Burnaby

Body found in Burnaby
Mounties in Burnaby say they have found the body of a 46-year-old man who went missing earlier this month. They say the public appeal for help to find the man was issued on February 1st. The R-C-M-P say investigators do not believe the death is suspicious.

Body found in Burnaby