Federal budget deficit projected at $18.4B

Mr. Morneau said Canada is on course to run a deficit of 18.4 billion Canadian dollars ($13.4 billion) in fiscal 2016-17-about 1% of Canada’s gross domestic product-before any new spending measures in his coming budget, such as ramped-up infrastructure investment and tax breaks for families.

This is nearly five times the $3.9 billion projection three months ago.

When the government unveils its maiden budget on March 22, the deficit could well exceed $20 billion once a number of big-ticket Liberal campaign promises – including infrastructure spending – are factored in.

In addition to the $18.4-billion deficit for the 2016-17 fiscal year, Ottawa projected a 15.5 billion deficit in 2017-18.

The deficit will be bigger, much bigger, than promised, even before the Liberals roll out their billions of dollars’ worth of promised spending.

The Liberals are banking on some of their vows to help revive economic growth and create jobs in Canada’s struggling economy.

Canada’s Finance Minister Bill Morneau lowered economic expectations Monday, saying the oil rout will put his Liberals’ first budget into a deeper deficit than was promised only months ago.

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.

As part of its growth strategy, the finance minister has appointed Dominic Barton, global managing director with McKinsey and Company, as chairman of a new Advisory Council on Economic Growth. If introduced, the party’s platform projects this program would have a net new cost of $1.8 billion next year once it replaces the plan introduced by its Conservative predecessors. “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 Prime Minister Justin Trudeau has recently admitted that the Liberals were not going to achieve their goal of maintaining the 2016-2017 deficit to below $ 10 billion.

However, one of the government’s main “fiscal anchors” was to continue lowering the federal debt-to-GDP ratio, and even that commitment may be hard to hold to in the short term with growing deficits, he said.

During the last election, Conservative leader Stephen Harper had a bit of fun mocking Trudeau’s plans to run two deficits of up to $10 billion before bringing the country back into black for the 2019-2020 budget.

The council will meet regularly with Morneau to advise him on policy actions on how to create conditions for long-term economic growth.

Today’s fiscal update includes a $6 billion a year contingency – double the $3 billion Ottawa used in past projections. The GDP growth for 2017 remains unchanged at 2.2 per cent.

The November fiscal update assumed nominal growth, which includes inflation, would reach 4.2 per cent in 2016.

2015-16: 1.1 per cent, down from 1.2 per cent.