Canada's new government says fiscal outlook worse than projected

Fri Nov 20, 2015 1:26pm EST
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By Randall Palmer

OTTAWA (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.

He spoke of the need to strike "a balance between fiscal discipline and our promises to Canadians." He also said it was clear governments cannot cut their way to prosperity, and the disappointing outlook reinforced the need for the Liberal spending promises.   Continued...

Canada's Finance Minister Bill Morneau speaks during a news conference upon the release of the economic and fiscal update in Ottawa, Canada November 20, 2015. REUTERS/Chris Wattie