UPDATE 2-Canadian economic growth is less than forecast, says Morneau

Mon Sep 26, 2016 3:00pm EDT
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(Adds quotes by Morneau, analyst comment, background)

By David Ljunggren

OTTAWA, Sept 26 (Reuters) - Canadian economic growth this year is less than the government initially expected, Finance Minister Bill Morneau said on Monday, in a sign Ottawa could run budget deficits for longer than planned.

The Liberal government based the federal budget in March on an average private sector growth forecast of 1.4 percent for the 2016-17 fiscal year. The document also included a C$6 billion ($4.6 billion) adjustment for risk.

"In our last budget we made provisions about the level of growth and we put in a level of prudence. Now I can say we made a good decision because the level of growth is a bit lower than forecast," Morneau told reporters. He did not give details.

The budget forecast a deficit of C$29.4 billion, three times larger than the Liberals initially promised, in order to boost spending on infrastructure and other areas in hopes of stimulating the economy.

The government typically provides a fiscal update to the budget in November or December and Morneau indicated Ottawa might provide a further boost if needed.

Asked whether the update would be a mini-budget with additional fiscal stimulus, he replied: "We will look at the economic situation in order to figure out what we should be doing, not only in November, but in our upcoming budget."

Although Morneau said in late March that Ottawa would balance the books in about five years, the official opposition Conservative Party says the spending plans are excessive and will result in long-term deficits.   Continued...