Federal government to table fiscal update next week

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Finance Minister Chrystia Freeland said on Monday that the federal government’s autumn economic statement will be released on December 16.

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The update on Ottawa’s finances comes as concerns grow about Canada’s economic competitiveness, particularly declining productivity, business investment and per capita GDP levels.

Uncertainty surrounding the incoming second Trump administration in the United States and the impact of a proposed 25 per cent tariff on Canadian exports has prompted economic forecasters to reconsider Canada’s growth numbers over the next two years. In addition, Canada’s plans to reduce immigration and temporary foreign labor levels may have an impact.

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This could pose a problem for the federal deficit. A report from Canada’s budget watchdog in October predicted the federal government would not meet its pledge to keep the deficit below $40.1 billion. The parliamentary budget officer projected a deficit of $46.4 billion this fiscal year, higher than the $39.8 billion deficit initially estimated in the federal budget last spring.

Likewise, private sector economists also expect a larger deficit than promised. Desjardins Group estimates that the deficit will reach $46.5 billion.

There have also been a number of additional costs since those deficit estimates were made, such as the federal government’s recent tax break, where GST/HST will not be collected for two months. The CBO estimates this could cost the federal government $2.7 billion if provinces with a coordinated sales tax seek compensation.

Additional resources promised to support Canada’s borders are also likely to increase the budget deficit.

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In the wake of this announcement, business groups were already warning the federal government to exercise restraint.

“Canada faces significant economic and financial challenges, including declining innovation and productivity, an aging population and geopolitical pressures that could disrupt trade flows. In this environment, fiscal prudence is essential,” said Robert Asselin, senior vice-president of the Business Council of Canada.

“Unfortunately, this government has consistently failed to meet its fiscal targets and lacks a coherent strategy to boost private investment.”

• Email: jgowling@postmedia.com

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