OTTAWA — The parliamentary budget officer estimated that the federal deficits will exceed by more than 20% to the forecasts in the liberal government of Justin Trudeau for the next two years.
In its new economic and fiscal Outlook, the team of Jean-Denis Fréchette believes that Ottawa is expected to show a deficit of 22.1 billion $ at the end of the current fiscal year, or $ 4 billion more than what the government had projected in its February budget.
For the fiscal year 2019-2020, the parliamentary budget officer (DPB) estimates that the deficit will reach $ 21.4 billion, or 3.9 billion $ more than what was expected ($17.5 billion $). According to the DPB, this difference is due in large part to the higher forecasts for public debt charges, program expenses and direct benefits to children.
In his budget, two months ago, the liberal government projected deficits, at least until 2022-2023, without a specific timetable for a possible return to a balanced budget. During the election campaign of 2015, the liberals had promised not to post annual deficits exceed $ 10 billion, and achieve a balanced budget by 2019.
5 % chance
However, the DPB does not return to a balanced budget anytime soon. The independent agency estimates that approximately 5 % chance that the federal budget be balanced or even in surplus in 2020-2021; these chances are as low as 25 % for 2022-2023.
The DPB believes that the government will allocate $ 19.5 billion more than what it had planned in its budget to debt service between 2017-2018 and 2022-2023. This difference is mainly explained by the fact that he expected interest rates higher than those of the minister of Finance.
The report of the DPB contains, however, some figures that are better than the estimates. Thus, for the fiscal year of 2017-2018, the DPB anticipates that the deficit will be below $ 600 million to the government’s forecasts contained in the February budget. And for the fiscal year 2022-2023, the federal deficit would be lower than $ 1.7 billion in the forecast of the minister of Finance.
Moreover, the fiscal situation of the federal government are also expected to suffer from higher costs than expected – a billion over five years – the chapter of the bonus of the measures contained in the budget of 2018 for the low-income workers, including the Allocation of canadian workers. The minister of Finance had estimated that the enhancement of the refundable tax credit would cost approximately 831 million $ in Ottawa between 2018-2019 and 2022-2023; the DPB considers that expenditure to 1.84 billion $.
On the other hand, the DPB predicted that the implementation of the carbon charge in the federal government “will produce a headwind in the medium term for the canadian economy”.
“While the royalty rate will increase to spend $ 10 per tonne of CO2-equivalent in 2018 to $ 50 per tonne in 2022, we expect that the real GDP will be 0.5 percent lower in 2022 than it should be – we are talking about a sum of $ 10 billion”. This forecast is based on an analysis conducted by the Commission on the écofiscalité.
“The carbon charge would generate significant revenues in the medium term, writes the DPB. As pointed out by the Commission of the écofiscalité, the impact on the economy will depend on how these revenues will be used.”