Weaker Canadian Economy Translates Into Larger Deficits Over The Medium Term Than PBO Forecast in April.

November 10, 2015

The Parliamentary Budget Officer (PBO) projects a sluggish recovery for the Canadian economy as it adjusts to lower commodity prices and rebalances—shifting away from consumer spending and housing toward exports and business investment.

Based on Budget 2015 measures only, the PBO projects annual deficits averaging $4.3 billion (0.2 per cent of GDP) over 2016-17 to 2020-21. Federal debt is projected to fall from 31 per cent of GDP in 2014-15 to 26.2 per cent by 2020-21.

2015 2016 2017 2018 2019 2020
-2016 -2017 -2018 -2019 -2020 -2021
Budgetary balance ($ billions) 1.2 -3.0 -4.7 -5.0 -4.6 -4.2
Federal debt ratio (% of GDP) 30.8 29.9 28.8 27.9 27.1 26.2

Over the past six months, the outlook for the Canadian economy has deteriorated. The economy unexpectedly contracted in the first half of 2015. The IMF again marked down its outlook for the global economy.

The PBO’s outlook for oil and other commodity prices has been revised down and we now anticipate a larger adjustment in residential investment.

The PBO has revised down nominal GDP—a broad measure of the government’s tax base—by $20 billion each year, on average, between 2015 and 2020 compared with our outlook provided to the House of Commons Standing Committee on Finance on 28 April 2015. The downward revision results from both lower real GDP levels and lower economy-wide prices.

The PBO has provided an updated fiscal forecast that does not include the measures announced in the new government’s platform. The outlook is intended as a status quo planning assumption for the beginning of the 42nd Parliament.

The PBO will provide an updated outlook including measures proposed by the new government when further details are released during the new legislative session.

Source: November 2015 Economic and Fiscal Outlook

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