The Parliamentary Budget Officer expects federal deficits will be slightly larger than what Finance Minister Bill Morneau announced in his March budget.
Yves Giroux, in his role as Parliament’s spending watchdog, released his office’s independent assessment on Tuesday of where federal finances are heading over the coming years.
The March budget projected that six years of deficits will total $91.1-billion, while the PBO’s numbers add up to $95.4-billion over the same period – a $4.3-billion difference, or annual deficits that are about $700-million larger on average. The PBO says it expects government spending will be higher than projected in the budget and tax revenues will be lower.
The budget said the size of the annual deficit will peak at $19.8-billion in 2019-2020, before declining to $9.8-billion in 2023-2024.
In contrast, the PBO projects the 2019-20 deficit will be $17.7-billion and will then peak at $22.3-billion in 2020-21, before declining to $11.9-billion in 2023-2024.
“We see a significant increase in our forecast for the deficit,” Mr. Giroux told MPs Tuesday during an appearance before the House of Commons finance committee. However Mr. Giroux noted that the deficit is expected to decrease in size over time after peaking.
Mr. Giroux’s report said the probability that the Liberal government will deliver on its campaign pledge to balance the budget in 2019 is “near-zero.”
The PBO also said MPs should ask the government to explain a reference in the budget to a $3.8-billion improvement to the bottom line over six years from “non-announced” measures. Mr. Giroux said the entry could reference future spending cuts, new tax increases or a mix of both. However, he described it as “a big cloud of uncertainty” because Finance Department officials would not give the PBO more information about that budget entry.
The PBO’s fiscal forecasts assume the Canadian economy will grow at 1.6 per cent in 2019. Mr. Giroux acknowledged that this is slightly higher than the private-sector average – which is 1.5 per cent according to Bloomberg – and the Bank of Canada’s recent forecast of 1.2 per cent.
Pierre-Olivier Herbert, a spokesperson for Mr. Morneau, said the difference in forecasts could be due to the fact that the PBO is relying on more recent economic numbers. He also said the reference to unannounced measures is an accounting update to a $9.5-billion entry that was set aside in the fall. The future measures could involve money set aside for court settlements that can’t currently be disclosed.
He noted that the PBO agreed with the government that the size of the federal debt as a percentage of GDP is on track to decline over time.