Jim Flaherty: Budget deficit forecast $5B higher than March prediction
Published on Tuesday November 13, 2012 Share on twitterShare on facebook
OTTAWA—the federal government’s deficit-reduction plan is being knocked off course by weak world economic conditions, Finance Minister Jim Flaherty says in his fall budget update.
As a result, he forecast a $26-billion budget deficit this year, up from the $21 billion deficit he predicted in the March budget.
“Weak global demand has translated into lower-than-expected world commodity prices and this, in turn, has lowered the level of (economic growth) and government revenues in our forecast,” he said in a speech as he unveiled the update in Fredericton, N.B.
Between now and 2016, the federal government’s budget deficits will total $19 billion higher than previously forecast, according to the update. And balancing Ottawa’s books will not take place until 2016, a year later than predicted in the March 29 budget.
But Flaherty said the government remains committed to controlling federal spending to eliminate the deficit over “the medium term.”
As usual in the fall fiscal and economic update, there were no new tax or spending measures.
The latest assessment is clouded by the risks of financial turmoil in Europe and the United States.
Based on private-sector forecasts, the government has already said next year’s economic growth will come in at 2 per cent, down sharply from the 2.4 per cent cited in the March budget.
But Flaherty said Canada’s economy could be “significantly stronger” than expected if U.S. President Barack Obama can successfully work with Congress to avoid the fiscal crunch that threatens to batter the American economy early next year.
Flaherty noted that, domestically, the main risk to the economy is the elevated level of household debt run up by Canadian consumers.