Canada deficit projection too big by billions: watchdog

Thu Nov 29, 2012 4:47pm EST
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By Louise Egan

OTTAWA (Reuters) - Canada's budget watchdog said the Conservative government appears to have overstated its budget deficit by an average of C$4.7 billion ($4.74 billion) a year for the current and next three fiscal years, a finding the finance ministry disputed.

A report by the parliamentary budget officer (PBO) on Thursday assessed Finance Minister Jim Flaherty's revised budget outlook on November 13, which projected federal budget deficits for this year and the following three years that were on average C$5.8 billion bigger than the government estimated in its March budget.

Flaherty said then the federal government would wipe out a small deficit in 2016-17, a year later than previously forecast. But both Flaherty and Prime Minister Stephen Harper have since contradicted their own report, pledging to balance the books before the next election in 2015.

The finance minister has said the difference is due to a C$3 billion cushion in its latest forecasts that won't be used if the economy performs well.

The PBO said on Thursday the picture painted by the government is more pessimistic than is warranted.

The watchdog's calculations - based on the same forecasts the government uses - showed higher revenue and lower program expenses than the government estimated.

The report said the federal Department of Finance did not provide the PBO with enough information about its underlying assumptions and methods to properly explain the difference.

"Given the changes to the government's economic assumptions, and excluding the impact of policy decisions, the changes to Finance Canada's fiscal outlook since Budget 2012 are somewhat larger than what its sensitivities would suggest," the report said.   Continued...