UPDATE 2-Canada's new gov't says fiscal outlook worse than projected

Fri Nov 20, 2015 1:25pm EST
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(Adds Morneau quotes on government's fiscal intentions, Conservative and market reaction)

By Randall Palmer

OTTAWA Nov 20 (Reuters) - Canada's new Liberal government said on Friday it was inheriting a significantly gloomier fiscal picture than previously expected, and did not rule out the possibility it would run higher budget deficits than it had campaigned on.

Finance Minister Bill Morneau unveiled an economic and fiscal update which projected billions of dollars of deficits based on the former Conservative government's plans, despite previous Conservative forecasts of surpluses.

A large portion of the worsened outlook is due to the Liberals, who defeated the Conservatives in last month's election, having lowered growth forecasts to levels well below downwardly revised levels predicted by private-sector economists.

The move effectively adds a buffer or contingency reserve for worse-than-expected growth.

The fiscal update does not include Liberal spending promises made during the election.

Reporters repeatedly pressed Morneau as to whether the Liberals would now run deficits exceeding the C$10 billion ($7.5 billion) limit they had set in the campaign.

"It would be too soon for me to answer your question," Morneau said.   Continued...