Ottawa: Projected deficit jumps 16% to $46.5 billion

In a sign of the deteriorating economy, the Parliamentary Budget Officer (PBO) now expects the federal deficit to reach $46.5 billion in 2023-24, an amount 16% higher than what the Trudeau government initially projected.

Last March, Finance Minister Chrystia Freeland presented a red-ink budget in which she expected a deficit of $40.1 billion for the current year.

However, due to the economic slowdown and rising interest rates, Canada will sink deeper into debt, the CBO assesses.

According to its analysis published Friday, Canadian debt will instead rise to $46.5 billion this year, or 1.6% of Canada’s gross domestic product.

The economic outlook is not encouraging according to the OBR, which does not expect a cut in the Bank of Canada’s key interest rate before April 2024.

“After a decline in real GDP during the second quarter, the Canadian economy is expected to stagnate during the second half of the year, and growth is expected to remain weak during the first half of 2024. The unemployment rate is expected to reach 6%. Mid-next year “It will remain high throughout the first half of 2025.”

Thus, total federal debt is expected to equal 42.6% of Canada’s GDP at the end of fiscal year 2023-2024. This is a significant increase of 11.4% since the last budget before the pandemic, 2019-2022.

“Under the status quo policy, the deficit should decline in the medium term, reaching $8.2 billion in 2028-2029,” Giroux said.