In Budget 2023, the federal government projected that Canada’s deficit for the fiscal year ending March 31 will reach $43 billion, which is up 18% from a deficit of $36.4 billion forecast in last November’s fall economic update.
The deficit is growing as Ottawa ramps up spending on healthcare, clean technology, and helping low-income Canadians manage rising consumer prices.
In an unusual move, the federal government did not forecast a return to a balanced budget in its latest economic outlook. Ottawa said it now expects a deficit of $14 billion by fiscal year 2027-28, instead of a $4.5 billion surplus it had previously forecast.
Budget 2023 expects that federal debt as a proportion of GDP will climb to 43.5% in the fiscal year that begins on April 1, up from 42.5% in the current fiscal year.
Revenue raised by Ottawa through taxes and other measures is forecast to fall by $5.7 billion on average per year due to a weakening economy.
With inflation still well above the Bank of Canada’s 2% target and lower commodity prices, risks to Ottawa’s revenue projections are tilted toward the downside.
New spending on health transfers to Canada’s provinces and expanded dental care coverage will total $31.3 billion over six years, while clean energy initiatives are expected to cost $20.9 billion.
Ottawa plans to issue $172 billion in bonds in 2023-24, down 7% from the current fiscal year. The federal government plans to focus on two-year bonds, with those accounting for 44% of total issuance.
The federal government’s fiscal year runs from April 1 to March 31.
