Canada’s budget watchdog says the outlook is growing more bleak just weeks after Prime Minister Justin Trudeau won power with a pledge to stimulate the country’s struggling economy.
The Parliamentary Budget Officer cut its growth forecasts and projected C$9.3 billion ($7 billion) in new deficits over the next five years, according to a report published Tuesday. The dimming economic outlook doesn’t take into account Trudeau’s own pledge to run deficits of no more than C$10 billion annually.
Welcoming the PBO report, Finance Minister Bill Morneau said his department would produce its own fiscal update by the end of December and added it was too soon to say what impact the downgraded forecast will have on Liberal campaign pledges.
“It’s not really a surprise to us that the report is somewhat more pessimistic,” Morneau told reporters in Ottawa Tuesday evening. “We were and continue to be concerned with the state of the economy.”
Real GDP growth for 2015 is now projected at 1.1 percent, down from a forecast of 2.1 percent in a PBO report published this spring. GDP growth for 2016 was trimmed to 2 percent from
2.3 percent, while it was increased in 2017 to 2.3 percent from
“The economy and fiscal outlook has deteriorated” since an April 2015 report, the PBO said Tuesday. While growth is still projected after a contraction in the first half of 2015, “the recovery is expected to be restrained by weaker global activity and lower commodity prices.”
Asked if the Liberals can still balance the budget by fiscal 2019 as promised, Morneau said he wasn’t yet in a position to say.
“It’s way premature to go after decisions on whether we would rethink our platform commitments,” the finance minister said. “We believe what we put forward in our platform were the right approaches to dealing with what we see as tepid growth, and this just reinforces the need for those sort of commitments.”
The gloomier outlook is chewing up Trudeau’s room to keep his promise that deficits won’t exceed C$10 billion. Under the revised projections, Canada is already on pace to run C$12.7 billion in deficits over Trudeau’s first three budgets, during which he has forecast a total of C$25 billion in shortfalls.