The current outlook for the Canadian economy will form the foundation of the Liberal government's 2016 budget, as private-sector economists have been asked to submit their pre-budget forecasts by next week.
Finance Canada relies on an average forecast from about 15 private-sector economists as the basis for making assumptions for revenues and expenses in the federal budget. Economists have been asked to submit their latest forecasts and to explain whether or not their projections include assumptions about the growth impact of new federal spending.
The call for submissions comes just as several economists lowered their forecasts for economic growth. The ongoing volatility in oil prices and financial markets generally have economists advising Ottawa to continue the practice of assuming growth will be slightly less than the average forecast as a form of prudence should the economy underperform.
"Things aren't looking too great," says economist Arlene Kish, of IHS Global Insight. "The level of uncertainty just keeps growing."
Finance Minister Bill Morneau's November fiscal update reduced the government's forecast for economic growth in 2016 from 2.2 per cent to 2 per cent. The outlook has since worsened, with the Bank of Canada now expecting growth of just 1.4 per cent and some economists projecting growth of about 1 per cent for 2016.
That means simply delivering on existing promises will produce deeper deficits than the $10-billion maximum promised during the election campaign. The deficit could be even larger should the government announce additional measures.
Mr. Morneau said Friday that the government is considering a special measure for Alberta that would transfer up to $250-million under a fiscal stabilization program that has not been used in more than 20 years.
"It's for provinces that are going through extraordinarily difficult economic situations. We are looking at a possibility of up to $250-million," Mr. Morneau said, adding that he has had discussions with Alberta Finance Minister Joe Ceci about the program.
"If they apply, we will be working in order to make sure that we respond appropriately," said Mr. Morneau.
Also Friday, Finance Canada announced that Ottawa continues to run a small surplus so far this fiscal year.
The department's monthly tracking of Ottawa's bottom line shows the federal government ran a $392-million surplus in November. From April to November, the federal surplus stands at just over $1-billion.
The current 2015-16 fiscal year, which runs until the end of March, had long been identified by the previous Conservative government as the year that federal finances would return to surplus after running several years of deficits in response to the 2009 financial crisis. In fact, Ottawa recorded a surplus one year early, recording a surplus of $1.9-billion in 2014-15.
The final numbers for the current fiscal year won't be known until the fall.
The November fiscal update stated that before taking into account any new measures, Ottawa was on track for a $3-billion deficit in 2015-16 and smaller deficits over the next three years.
Conservative MP Karen Vecchio said the report was evidence that her party left the government with a "healthy surplus," but Mr. Morneau insisted that the year is still on track to end in deficit.
BMO chief economist Doug Porter says that based on current growth forecasts, simply delivering on the promises made in the Liberal platform would produce a deficit in the coming year of about $15-billion to $20-billion.
Bank of Canada Governor Stephen Poloz said this month that he decided against a further interest-rate cut largely because the bank wanted to wait and see the details of the federal budget and the impact its measures will likely have on economic growth.
The date of the budget has not been announced but it is widely expected to be released in March.
While there was some positive news Friday in the fact that Canada's economy grew in November, the data was largely in line with what forecasters had been expecting.