WRAPUP 2-Canada's stimulus budget aims to revive oil-hit economy

Tue Mar 22, 2016 6:07pm EDT
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(Adds Canadian dollar and opposition reaction; background on Bank of Canada)

By Leah Schnurr

OTTAWA, March 22 (Reuters) - Canada's new Liberal government on Tuesday unveiled a stimulus budget to revive growth with infrastructure spending and said it would run a deficit nearly three times larger than promised during last year's election.

The government said the budget was expected to raise growth 0.5 percent in the first year and 1.0 percent by the second after the party of Prime Minister Justin Trudeau warned last month an oil price plunge had weakened Canada's economic and fiscal outlook.

The government projected a C$29.4 billion ($22.5 billion) deficit for fiscal 2016-17, higher than the C$28.6 billion forecast in a Reuters survey, and gave no target date for returning to a balanced budget.

Economists said the stimulus package lowered chances the Bank of Canada will need to cut interest rates again in April.

Trudeau has pledged to break with Group of Seven peers by countering slow growth with fiscal stimulus rather than austerity. Finance Minister Bill Morneau said the government would spend C$3.97 billion on infrastructure projects in the coming fiscal year, ramping that up to C$7.32 billion the following year.

Infrastructure spending, a major plank of the Liberal campaign, will include upgrading public transit.

"We are seizing the opportunity to invest in people and the economy, and to prepare Canada for a brighter future," Morneau said in his budget speech.   Continued...