Projections indicate a budget deficit surpassing government’s aim of $40 billion annually
Experts are concerned about Canada’s ability to achieve its deficit reduction targets.
With the fiscal year concluding on March 31, projections have indicated a potential budget deficit of approximately $47 billion, surpassing the government’s goal of maintaining the deficit at around $40 billion annually until 2026.
Randall Bartlett (pictured), Desjardins’ senior director of Canadian economics, expressed skepticism about this goal and said it will need to either cut spending or increase revenues to bridge the gap.
Due to potential budget deficits, business groups have started to worry about the government imposing corporate tax hikes in its upcoming budget announcement.
However, Bartlett noted that such a move could attract criticism towards the government for being anti-business and may not be a feasible solution to the current fiscal year’s challenges.
“That hasn’t been telegraphed and a retroactive tax on companies would be a hard sell — it’s not conducive to a stable and predictable investment environment,” Bartlett said, adding that the government may instead reveal “unexpected savings” or consider selling assets to mitigate the deficit.
Adding to the uncertainty regarding Canada’s deficit is a new initiative to subsidize diabetes medication and birth control costs, which haven’t been accounted for.
Potential increases in defence spending are also being discussed, according to Bartlett.
“Consistently running deficits to fund operating expenses, accumulating debt and pushing up against fiscal anchors puts Canada’s fiscal credibility and triple‑A credit rating at risk,” he said in his analysis. “Still, the country’s position remains ‘enviable’ compared to other advanced economies, which have higher debt burdens and are running larger deficits.”
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