Ot­tawa to run $1B deficit: forecast

The Guardian (Charlottetown) - - CANADA - BY ANDY BLATCHFORD

The Bank of Canada's latest eco­nomic forecast puts the fed­eral gov­ern­ment on track to run a $1-bil­lion deficit in 2015-16, cast­ing doubt on the gov­ern­ing Con­ser­va­tives' prom­ise to bal­ance the elec­tion-year books, says a new anal­y­sis by the par­lia­men­tary bud­get of­fice.

The re­sults of the cal­cu­la­tions, based on the down­graded pro­jec­tion re­leased last week by the cen­tral bank, also trim the gov­ern­ment's ex­pected sur­pluses over the next two years.

The bleaker fis­cal out­look, re­leased Wed­nes­day, sur­faces as po­lit­i­cal par­ties are pitch­ing eco­nomic poli­cies to vot­ers ahead of the Oc­to­ber elec­tion.

In its April bud­get, the Harper gov­ern­ment pre­dicted a string of sur­pluses, start­ing with $1.4 bil­lion for this elec­tion year. The gov­ern­ment forecast sur­pluses of $1.7 bil­lion in 2016-17 and $2.6 bil­lion in 2017-18.

But the bud­get of­fice projects the gov­ern­ment pro­duc­ing a $1bil­lion short­fall in 2015-16 fol­lowed by smaller sur­pluses of $600 mil­lion and $2.2 bil­lion over the next two years.

Their cal­cu­la­tions used fresh pro­jec­tions by the Bank of Canada, which last week low­ered its out­look for eco­nomic growth in 2015 to 1.1 per cent, down from 1.9 per cent ear­lier this year.

Canada's econ­omy has been strug­gling, lead­ing some to state it has slipped into re­ces­sion.

It con­tracted in the first quar­ter of the year at an an­nu­al­ized rate of 0.6 per cent - in large part due to the steep drop in oil prices and the fail­ure of other sec­tors to pick up the slack.

That num­ber reg­is­tered well be­low the fed­eral bud­get's pro­jec­tion that real gross do­mes­tic prod­uct would grow by 1.2 per cent over the first three months of 2015.

The bud­get of­fice fac­tored in pos­i­tive off­sets that have ap­peared since the re­lease of the spring bud­get: lower in­ter­est rates and higher gross do­mes­tic prod­uct in­fla­tion. Their pro­jec­tions also use up the gov­ern­ment's $1-bil­lion an­nual re­serve set aside for con­tin­gen­cies.

The anal­y­sis was pro­duced by the in­de­pen­dent of­fice fol­low­ing re­quests by NDP MP Nathan Cullen and Lib­eral MP Scott Bri­son. Both their par­ties were quick to jump on the re­sults.

“Well, that was sup­posed to be the Con­ser­va­tives' hall­mark brand­ing, wasn't it?” New Demo­crat Leader Tom Mul­cair said while tour­ing south­west­ern On­tario Wed­nes­day.

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