PBO watch­dog par­tially faults coro­n­avirus for lower outlook

Montreal Gazette - - FP MONTREAL -

Canada’s econ­omy slowed “sharply” in the fi­nal quar­ter of 2019, the par­lia­men­tary bud­get of­fice said Thurs­day in its February eco­nomic and fis­cal report.

And the new coro­n­avirus out­break, com­bined with lower-than-ex­pected business spend­ing, will likely push eco­nomic growth lower in the first quar­ter of 2020, the PBO pro­jected. “We ex­pect real GDP to grow by 1.5 per cent in the first quar­ter of 2020,” on an an­nual ba­sis, the report said.

“While some of the im­pact of the dis­rup­tions is ex­pected to be re­versed, we project slower growth due in part to the coro­n­avirus and weaker business in­vest­ment.”

The out­break, which has di­rectly af­fected China the most but has also been felt by a num­ber of coun­tries in­clud­ing Canada, could shave 0.3 per­cent­age points off Canada’s eco­nomic-growth pre­dic­tion for the be­gin­ning quar­ter of 2020, al­though the PBO said that was not a cer­tainty.

“Es­ti­mates of the over­all im­pact of the coro­n­avirus are highly un­cer­tain at this time.”

The coun­try’s over­all an­nual growth rate dropped to an an­nu­al­ized 0.3 per cent in the fourth quar­ter, the PBO said, a pro­jec­tion that was “sig­nif­i­cantly weaker” than the 1.6-per-cent growth rate pre­dicted in its fall report.

Par­lia­men­tary bud­get of­fi­cer Yves Giroux blamed the fourth-quar­ter weak­ness mainly on what he de­scribed as tem­po­rary dis­rup­tions in the min­ing, oil and gas, mo­tor ve­hi­cle and rail trans­porta­tion sec­tors.

The report also pre­dicted the fed­eral bud­getary deficit for fis­cal year 2019-20 will reach $23.5 bil­lion — roughly 10-per-cent higher than pro­jected in Novem­ber — as a re­sult of new gov­ern­ment spend­ing an­nounced in the De­cem­ber eco­nomic and fis­cal up­date. “An ad­di­tional $800 mil­lion in fis­cal de­vel­op­ments adds to the bud­getary deficit due to higher op­er­at­ing ex­penses, which are par­tially off­set by stronger rev­enues,” the report said.

Those ex­tra op­er­at­ing ex­penses were largely the re­sult of higher cur­rent ser­vice costs for pen­sion and other fu­ture ben­e­fits that were not fac­tors in the Novem­ber report.

The coro­n­avirus out­break could cut 0.3 per­cent­age points off Canada’s growth fore­cast in Q1.

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