Finance minister to spell out Canada’s downgraded economic outlook

Prime Minister Justin Trudeau has already said his government would not be able to keep his election promise that the deficit for the next budget year would be kept to under $10 billion. “We’ll be acting out of reason”.

The deficit for the fiscal year that begins April 1, 2017 is projected to narrow to C$15.5 billion, not including new budget measures.

The Liberal government is now forecasting larger than expected deficits for the next two years even before adding billions in promised spending in its first budget, which will be tabled on March 22.

“I’m talking about investments, not spending”, Morneau said.

“Our starting point is much further back than we thought”, said Morneau.

These calculations are based on an average projected oil price of $40 for 2016, which is down from $54 from the governments fall update.

Their 2016 growth forecasts – which the government uses in planning its budget – were also lowered from 2.0 percent to 1.4 percent.

Ottawa also adjusted its deficit forecast for 2015-16 – a shortfall is now projected to be $2.3 billion rather than the previous estimate of $3 billion. “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.

This morning, Morneau gave an economic update at a townhall event in Ottawa, as part of his pre-budget consultations.

Morneau blamed global economic concerns and Conservative mismanagement for the $18 billion shortfall.

Among Group of Seven economies, Canada has sustained the biggest economic shock from the drop in the price of oil, a top Canadian export.

Minister of Finance Bill Morneau responds to a question during question period in the House of Commons on Parliament Hill in Ottawa on January 29, 2016.

The figures will show Canadians that a lot has changed since the federal government last released this type of data in its November fiscal and economic update, said the source, speaking on condition of anonymity because the details were not yet public.

Ambrose called on Morneau to get spending under control and introduce more “business-friendly” measures, such as ratification of the Trans-Pacific Partnership trade deal.

Trudeau also cast doubt whether he would make good on his vow to balance the books within his four-year mandate – a headline pledge in the Liberal election platform.

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.

BMO Capital Markets released a research note Monday that says the deficit could reach upwards of $30 billion in 2016-17.

Morneau also announced in his speech that Dominic Barton, a director from the consulting firm McKinsey & Company, will lead a new advisory council on economic growth.

The Council will advise the government on creating economic growth, with a focus on the middle class.