The federal Liberal government in Ottawa has announced that the federal deficit is $8.6 billion lower than it previously forecast in the March budget.
In a fall economic update, Finance Minister Bill Morneau said government accountants now project the federal budget deficit to be $19.9 billion in the current 2017-18 fiscal year, down from the 2017 budget forecast of $28.5 billion. The $19.9 billion figure includes a $1.5 billion risk adjustment.
The deficit is on track to continue declining over the next five years – falling to $12.5 billion in 2022-23. But there is still no forecast for a balanced budget. Instead, the federal Liberals plan to prioritize bringing down Canada`s debt-to-GDP rate instead of eliminating the overall debt.
Critics complained that the Liberals have broken a campaign promise. During the 2015 federal election, Prime Minister Justin Trudeau pledged to run maximum deficits of $10 billion until 2019 when he promised to balance the books. In an interview on CTV’s Power Play late Tuesday, Minister Morneau defended the broken promise of returning to balanced budgets.
``What we were talking about at that time was a demonstration of fiscal responsibility. We think we’ve found a way to really show that,`` he said.
Canada`s economy is expected to grow by 3.1% in 2017, which is considerably higher than expected at the start of the year, and 2.1% in 2018 before dropping to 1.6% in 2019. In the fall update, Minister Morneau said that Canada is the fastest-growing economy in the G7, with GDP growing at an average of 3.7% over the last year; and that 450,000 new jobs have been created in the last two years.
The economic statement includes $14.9 billion of new spending—above what was earmarked in the 2017 budget—over the coming five years. This money will be spent on increasing the Canada child benefit by indexing it to inflation as of July 2018, and boosting the working income tax benefit, a refundable tax credit for low income Canadians in the workforce.