July 20, 2015 / 7:09 PM / in 2 years

Canada's New Democrats seek new budget outlook due to low growth

OTTAWA (Reuters) - Canada’s opposition New Democratic Party (NDP) asked the country’s Parliamentary Budget Officer on Monday to update federal budget figures in light of a sharply weaker economic forecast from the Bank of Canada.

Canada’s Conservative government, which is facing an election in October, has pledged to balance the books this year for the first time in almost a decade. But the economy’s struggles since last year’s plunge in prices for oil, a major Canadian export, have raised doubts about whether this can be achieved.

The Parliamentary Budget Officer, Jean-Denis Frechette, has a mandate to provide independent analysis to the country’s lawmakers.

“The downgrade in the Canadian economic forecast is likely to have a significant impact on the fiscal projections included in budget 2015,” NDP Member of Parliament Nathan Cullen, the left-leaning party’s spokesman on finance, wrote Frechette.

The NDP have pulled ahead of the Conservatives in recent opinion polls, with the economy seen as a factor.

The government’s budget in April forecast a narrow surplus of C$1.4 billion ($1.1 billion) in the fiscal year that started on April 1, but that was predicated on economic growth of 2.0 percent in 2015.

At the time, the Bank of Canada projected a similar growth level, 1.9 percent, for 2015. But the central bank downgraded that to 1.1 percent on Wednesday and said the economy likely shrank in the first two quarters.

The bank’s lower forecast has prompted talk in Ottawa that instead of a 2015-16 surplus, which would have been the first in eight years, there may now be a narrow deficit.

Melissa Lantsman, spokeswoman for Finance Minister Joe Oliver, said on Wednesday that Canada is still on track for a balanced budget in 2015.

“The Bank of Canada, the IMF (International Monetary Fund) and private-sector economists all project the Canadian economy will grow in 2015,” she said.

Lantsman said there were no plans to bring forward a fiscal update before the Oct. 19 federal election. The finance minister normally delivers a budget in the spring and a fiscal update in the autumn.

Assistant Parliamentary Budget Officer Mostafa Askari said the office would probably respond to the NDP’s request later in the week.

He said it was within reason for a legislator to request such information in view of the latest growth data and changes in the central bank’s projections.

Editing by Jeffrey Hodgson; and Peter Galloway

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