Canada vows balanced budget in 2015 without "slash and burn"

Thu Mar 21, 2013 6:09pm EDT
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By Louise Egan

OTTAWA (Reuters) - Canada's Conservative government pledged on Thursday to close tax loopholes and curb spending to erase its budget deficit in time for the 2015 election, even as it committed funds to infrastructure, manufacturing and job training.

The projected deficit in the fiscal year ending March 31 is roughly in line with Ottawa's previous forecast in November, at C$25.9 billion ($25.4 billion). The deficit would be about 1.4 percent of the size of the economy, compared with about 5.6 percent for the U.S. deficit.

But a big hit to revenues as the economy slows has forced Ottawa to project a bigger-than-expected shortfall in 2013/14, at C$18.7 billion, or about 1 percent of gross domestic product, compared with a previous estimate of C$16.5 billion. The deficit will shrink to a third of that the following year before returning to a surplus of C$800 million in 2015/16.

Finance Minister Jim Flaherty said he could have cut spending more drastically but opted for "moderate choices" so he could stimulate growth and jobs.

"I want our country to be in a very solid fiscal position in case in the future we have another crisis," Flaherty told reporters.

"History tells us that crises - economic crises, credit crises - are inevitable from time to time. So the best thing we can do for Canada, it seems to me, is to make sure we have a solid foundation," he said. "We do not need to slash and burn, we can be sensible over time."

Moody's Investors Service confirmed Canada's triple-A bond rating after seeing the budget.

But the political opposition was not impressed, accusing Flaherty of shrinking government at the expense of growth, and of failing to deliver any new spending programs to help the unemployed.   Continued...

Canada's Finance Minister Jim Flaherty speaks during Question Period in the House of Commons on Parliament Hill in Ottawa March 19, 2013. REUTERS/Chris Wattie