The federal government is projecting a deficit of at least $18.4 billion next year, which could exceed $20 billion when the federal budget is unveiled on March 22.
Finance Minister Bill Morneau presented the updated numbers at a pre-budget town hall in Ottawa on Monday, before taking questions from the audience and reporters.
Morneau said the government will post a smaller-than-projected deficit of $2.3 billion for 2015-16, down from the $3-billion deficit projected in November’s fall fiscal update.
But that deficit will balloon to $18.4 billion in 2016-17 and $15.5 billion in 2017-18 — and that is before any new spending Morneau outlines in the March budget. Those numbers are drastically different from the $3.9-billion and $2.4-billion shortfalls forecast just three months ago.
“Our starting point is much further back than we thought,” Morneau said Monday.
“A less ambitious government might see these conditions as a reason to hide, to make cuts or to be overly cautious. But our government might see that the economic downturn makes our plan to grow the economy even more relevant than it was a few short months ago.”
Interim Conservative Leader Rona Ambrose slammed the Liberal government for the lack of vision and focus in its economic policy and blamed the soaring deficit on “uncontrolled, permanent, new spending.”
“I find this reckless, irresponsible and it’s entirely the result of the finance minister and the prime minister not being able to make the decisions that they need to make today to respect taxpayers’ money,” Ambrose said on Parliament Hill.
Morneau said the Liberals will focus on making investments in infrastructure, innovation, measures to help the middle class and the country’s most vulnerable.
“We were elected to a fundamentally new approach to growing our economy. We said to Canadians that a time of low-economic growth the right thing to do is make investments in the economy,” Morneau said in Ottawa Monday.
“The wrong thing to do would be to make cuts.”
But Ambrose was critical of the government’s plan, calling it “a recipe for waste and mismanagement.”
“The Liberals’ massive borrowing and spending makes no sense, if it doesn’t do anything to create opportunities for people to get back to work,” Ambrose said. “Unfortunately, their plan is for reckless, permanent new spending that does nothing except create bigger government.”
Prime Minister Justin Trudeau has already said his government will not be able to keep an election promise to keep deficits under $10 billion for the next budget year, and has backed away from a promise to balance the budget by the end of his four-year mandate.
The revised two-year economic and fiscal outlook takes into account sharp declines in crude oil prices since the fall update and continued uncertainty in the global economy.
Slower GDP growth
Morneau said private sector economists now expect crude oil prices (for West Texas Intermediate) to average $40 US per barrel in 2016, down from $54 per barrel expected in the fall update. He said the current price stands at $31.50 per barrel.
A recent OECD report also revised real gross domestic product growth for Canada to 1.4 per cent in 2016, down from two per cent growth forecast in the fall update.
“We were elected to a fundamentally new approach to growing our economy. We said to Canadians that a time of low-economic growth the right thing to do is make investments in the economy,” Morneau said in Ottawa Monday.
“The wrong thing to do would be to make cuts.”
Morneau said the Liberals will focus on making investments in infrastructure, innovation, measures to help the middle class and the country’s most vulnerable.
With files from CBC News and The Canadian Press
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