Ottawa’s Parliamentary Budget Office has grim projections for Canada in the coming year, anticipating a slow economic growth and a much larger national deficit than predicted by the governing Liberals.
In its latest economic and fiscal outlook released on Tuesday, the PBO forecasts a $46.8 billion deficit for 2024, significantly more than the Liberals’ $40.1 billion projection from last fall.
The deficit for 2023 was $24 billion.
Parliamentary Budget Officer Yves Giroux doubts he’ll see balanced budgets in the short term, however, he said the government seems to be slowly moving in the right direction over the next five years.
“It certainly does not suggest that we are returning to balanced budgets, probably smaller deficits than what we have seen. Although, again, it’ll depend on how much new spending is in the government’s budget when it’s tabled next month,” said Giroux, according to the National Post.
Additionally, the report predicts higher deficits than Liberal projections for the next several years to come, due to higher-than-normal spending and higher debt charges, according to the government’s books.
Giroux’s estimates don’t include the costs of the newly announced national pharmacare legislation or the new Canada Disability Benefit, which recently passed in the House of Commons.
Nor does the latest report include any spending increase that is likely coming to the defence department, a sector that the government faces mounting pressure to fund.
The report is predicting less than 1% economic growth for 2024, before picking up pace again in 2025, however, Giroux stopped short of calling his predictions for this year a recession.
“Sluggish economic growth, I think is our best estimate, at this point with the information that we have right now, but there could always be surprises,” he said.
Should the Bank of Canada cut interest rates sometime this year, things could improve sooner than later but there is no guarantee that it will. The central bank announced that key rates would remain at 5% on Wednesday.
“If the bank is delayed or takes more time, before it starts to decrease the rate, that could act as a drag on economic growth,” said Grioux.
Sustained high-interest rates will also raise the cost of the government’s borrowing, noted Giroux.
There is a divide amongst economic analysts as to when the central bank will begin to lower rates with some suggesting as early as April, while others don’t expect a cut until at least June.
However, Giroux said a pause until June would only further add to the economy’s slow growth.
“Delaying that to June, for example, would be a headwind for the Canadian economy, but it wouldn’t be super strong so it wouldn’t not be sufficient in and of itself to put the Canadian economy in a recession,” he said.
This week Finance Minister Chrystia Freeland announced she would be presenting her 2024 budget on April 16.
