Ottawa’s timetable for balancing its finances seen as ‘go-slow approach’
OTTAWA – The federal government nailed down its moving target for balancing the budget on Thursday, saying it will eliminate the shortfall over the next three years and post a surplus by 2015-16, as Canada’s economic outlook improves.
“We are on track,” Finance Minister Jim Flaherty said Thursday as he tabled his 2012 budget.
“In less than two years, we have already cut the deficit in half,” Flaherty said. “We did it by ending our targeted and temporary stimulus meas- ures, and by controlling the growth of new spending.”
The government on Thursday cut its deficit estimate for the current year to $24.9 billion from $31 billion – roughly in line with economists’ expectations – and set the shortfall for 2012-13 at $21.1 billion. The deficit is expected to shrink to $10.2 billion in 201314 and go down to $1.3 billion the following year.
The surplus should come in at $3.4 billion in 2015-16, and reach $7.8 billion a year later.
“Canadians need to be confident in our prospects for economic growth,” Flaherty said. “To provide this confidence, we must ensure that Canada’s finances are sustainable over the long term.
“To that end, we will fulfil the commitment we made in the Economic Action Plan budget of 2009, to return to balanced budgets in the medium term.”
Avery Shenfeld, chief economist at CIBC World Markets, said the timetable for deficit reduction is “a relatively go-slow approach.”
In fact, RBC Economics this week projected the government could balance the budget even before 2015-16.
“Using the better-thanexpected 2011-12 deficit and maintaining the growth rates from the (November fiscal) update, the projections show a return to balance is possible as early as 2014-15, two years ahead of plan,” RBC said.
In his November fiscal update, Flaherty pushed back the government’s original break-even target of 2014-15 amid a weaker-than-expected recovery in both Canada and the United States and a growing debt storm in Europe.
Since then, the economic picture in North America appears to be improving slightly and the possibility of a major default by Greece – which threatened to spread elsewhere in Europe – has eased.