Canada’s parliamentary budget officer says higher expenditures offset higher revenues, leading to a projection that the deficit exceeded the federal Liberal government’s promise to keep the deficit under $40 billion.
On Thursday, Canada’s budget watchdog estimated in its latest economic and fiscal outlook that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year. However, the exact figure will be confirmed when the government publishes its annual public accounts. For the 2024-25 fiscal year, the PBO forecasted the federal deficit to come in at $46.4 billion, assuming no new measures.
In an interview with BNN Bloomberg Thursday, Yves Giroux said there was “quite a difference” between the estimate for 2024-25 and the promised $40 billion cap.
“Looking at the current fiscal year, $46.4 we think is the likely scenario before the government introduces additional measures, for example, in an upcoming fall update or as one-off announcements, and that’s due mostly to higher expenditures that more than offset obviously higher revenues,” he said.
“Higher revenues due to pleasant surprises on the corporate income tax front, but also slightly higher than expected revenues on the personal income tax side.”
Giroux said the report included the “likely number” for the deficit from the last fiscal year, which ended on March 31.
“Even though we are in the middle of October and it’s more than 6.5 months since the last fiscal year ended, we still don’t know what the deficit was for the year that ended in March. So based on the information that we have that is available to us, we think the government probably registered a deficit of $46.8 billion… whereas the budget in April indicated that the deficit for that year would be $40 billion,” he said.
Giroux added that the figure will be released when the government “decides to table the public accounts,” which could happen “anytime now,” but is legally required to be released by Dec. 31.
“I assume they know by now because the public accounts must be closed. It’s just a matter of releasing the numbers and we’re all waiting for that,” he said.
2025 economic rebound
While the PBO predicts tepid economic growth for the rest of the year, he also expects a rebound in 2025 as the Bank of Canada continues its easing cycle.
“So lower interest rates should facilitate household consumption as well as business investment, leading to a rebound compared to the current fiscal year where we expect growth to average 1.1 per cent throughout the year,” Giroux said.
“So, rising to 2.2 per cent and then tapering off or remaining stable around two and 1.9 per cent for the remainder of the forecast period. Mostly due to good performance, relatively good performance in the household and business investment sectors.”
With files from the Canadian Press.