Close X
Saturday, November 23, 2024
ADVT 
National

Will Ottawa meet its fiscal target? Economists split as deficit tracks higher

Darpan News Desk The Canadian Press, 14 Mar, 2024 10:26 AM
  • Will Ottawa meet its fiscal target? Economists split as deficit tracks higher

Finance Minister Chrystia Freeland has pledged that the government will meet its fiscal targets in the upcoming federal budget, but economists say achieving that goal will be challenging as the deficit tracks higher. 

Amid mounting pressure to rein in spending, the Liberals unveiled new fiscal guardrails in the fall that aim to limit deficits. Among the government's promises was that this year's deficit will not exceed $40.1 billion.

In new reports previewing the federal budget, TD and Desjardins offer different takes on whether the government will meet its goal for the current fiscal year. 

TD says although the deficit appears to be tracking closer to $55 billion, it is projecting it will be capped at $40 billion. 

"I think the government has an ability to do this," said James Orlando, TD's director of economics. 

Meanwhile, Desjardins is projecting the deficit to come in at $47 billion, not far off from the parliamentary budget officer's forecast published last week. 

"When we look at the information that the government publishes, for the current fiscal year it seems as though unless there's a big surprise it will be very difficult for the federal government to meet its fiscal anchor," said Randall Bartlett, senior director of Canadian economics at Desjardins.

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

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

Last month, Freeland doubled down on the government's commitment to its new spending rules during a news conference in Poland. 

"For our government, it is very, very important to invest in Canada and Canadians … and to do so in a fiscally responsible way," she said.

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

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.

The federal budget, which Freeland is set to present on April 16, comes at a time when cost-of-living issues continue to dominate Canadian politics and the Conservatives maintain a healthy lead in the polls. 

The Liberal government has signalled the budget will focus on challenges facing young people, with housing topping that list. 

It's also expected to contain more details on the newly announced pharmacare program, which promises to cover contraceptive and diabetes medication. 

But does the government have any money to spend on these priorities?

Orlando said TD expects the government will have about $5- to $10 billion of fiscal room that could help fund some of their priorities. 

"This would mean that the government could either bank this amount of money and reduce the budget deficit for future years, or they could maintain their current deficit outlook. And that would mean that they would be spending a little bit more money," Orlando said. 

Both economists said the government has benefited from stronger-than-expected economic growth. At the same time, however, they noted program spending and public debt charges have risen faster than the government had projected. 

Although things are looking difficult, Bartlett said it's not impossible for the government to find a way to keep this year's deficit from rising beyond $40 billion.

For example, the federal government could sell off assets, he said. Alternatively, there could be lapsed spending — which refers to money allocated to departments that goes unspent. 

But Bartlett said those wouldn't amount to real savings.

"We need to see something more long-term in nature, as to get a sense of … if they do reach some fiscal target this year, how they're going to do it next year, and how they're going to keep doing it in the future," Bartlett said. 

MORE National ARTICLES

Richmond, B.C., council votes to back safe consumption site after fractious meetings

Richmond, B.C., council votes to back safe consumption site after fractious meetings
Richmond, B.C., resident Edward Cheung says many community members feel they know exactly what will happen if a supervised safe consumption drug site is established in the city. Cheung, whose parents live close to a supportive housing complex that opened in 2019, said in an interview on Wednesday that the neighbourhood has dealt with a spike in petty crime since then, and he is worried something similar would happen with a safe consumption site.

Richmond, B.C., council votes to back safe consumption site after fractious meetings

More upgrades to improve flood resilience in Abbotsford, B.C., after 2021 disaster

More upgrades to improve flood resilience in Abbotsford, B.C., after 2021 disaster
Premier David Eby says his government will provide almost $80 million to help upgrade Abbotsford's Barrowtown Pump Station, which was nearly overwhelmed in 2021 by atmospheric rivers that set off catastrophic flooding in the Sumas Prairie.  The area is a key bread basket for B.C., and Eby says the flooding on the Sumas Prairie could have been much worse had the pump station failed.   

More upgrades to improve flood resilience in Abbotsford, B.C., after 2021 disaster

Charges in crash that killed mom of 4

Charges in crash that killed mom of 4
A 56-year-old man has been charged after a fatal crash near Trail, B.C., in October 2022 that killed a mother of four and injured her children. BC Highway Patrol says Terry Jackson faces three charges, including the most serious allegation of dangerous operation of a motor vehicle causing death.

Charges in crash that killed mom of 4

Carbon price rebates rising in most provinces April 1

Carbon price rebates rising in most provinces April 1
The federal carbon price will increase April 1 to $85 per tonne, up from $60. British Columbia and Quebec are the only two provinces that do not use the federal carbon levy as they have their own equivalent systems.

Carbon price rebates rising in most provinces April 1

Veteran B.C. politician Mike de Jong to leave legislature, mulls federal run

Veteran B.C. politician Mike de Jong to leave legislature, mulls federal run
Veteran British Columbia politician Mike de Jong has announced he will leave the legislature after a 30-year career in government and opposition. De Jong, who was first elected as a B.C. Liberal in a Fraser Valley byelection in 1994, says the time has come to leave the provincial legislature, but it may not be the end of his days in politics.

Veteran B.C. politician Mike de Jong to leave legislature, mulls federal run

Prince Harry and Meghan Markle in Whistler, B.C., for Invictus Games training camp

Prince Harry and Meghan Markle in Whistler, B.C., for Invictus Games training camp
The purpose of this week's training camp is to support nations taking part in the Games to build year-round adaptive sports programs. The Duke and Duchess of Sussex are scheduled to join the participants during some of the events at the camp today and Thursday in Whistler and on Friday in Vancouver.

Prince Harry and Meghan Markle in Whistler, B.C., for Invictus Games training camp