WRAPUP 1-Canada says commodity drop hits budget, surplus on track

Mon Oct 29, 2012 2:08pm EDT
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* Lower commodity prices hit government revenues

* 2012-16 growth profile unchanged despite weaker 2013

* Budget officer, gov't see balanced budget in medium term

* Budget officer sees Canadian rates on hold until 2015

By Louise Egan

OTTAWA, Oct 29 (Reuters) - Lower commodity prices are reducing the Canadian government's revenues, Ottawa said on Monday but forecast it will still be able to eliminate its budget deficit in the medium term.

Finance Minister Jim Flaherty said he expects economic growth of at least 2 percent through 2017, which was the consensus of private sector economists surveyed by his office this month. That leaves the Conservative government's overall economic outlook through 2017 unchanged from the forecast in its March budget despite a drop in its growth outlook for 2013.

Sharp downward revisions to the nominal level of gross domestic product, which is not adjusted for inflation, for this year and next were the biggest change in the new forecasts from the government's March outlook. The size of nominal growth has a direct impact on tax revenues.

"We know that the revenues are off. They're not off dramatically, but they're off a bit, and we'll have to adjust for that," Flaherty told reporters.   Continued...