Policies, not crisis seen causing Canada deficit

Thu Nov 20, 2008 12:28pm EST
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By Louise Egan

OTTAWA (Reuters) - The Canadian government will run budget deficits for the first time in over a decade as the economy slides into a mild recession, the new parliamentary budget officer predicted on Thursday.

The gloomy outlook provided by Kevin Page, the budget officer, provided ammunition to the opposition Liberals, who accused Conservative Prime Minister Stephen Harper of irresponsible spending and poor economic stewardship.

"The most interesting point was the statement in black and white that this deficit is not because of a global economic situation but its entirely because of actions taken by the Harper government," said Liberal legislator John McCallum.

"Its a made-in-Canada Stephen Harper deficit," he said.

Based on the average forecast of private sector economists, the report forecasts a deficit of C$3.9 billion in the 2009-10 fiscal year ($3.0 billion), starting April 1, and a deficit of C$1.4 billion in 2010-11. That would be followed by small surpluses in the next two years.

The "low" forecast, which Page sees as more likely, called for deficits of between C$12 billion and C$14 billion in each of the next four years.

"Given that the balance of economic risks is tilted to the downside, our judgment is that the lower range of budget projections represents a more likely range of actual outcomes," the report said.

Ottawa is seen running a surplus of C$4 billion in the current fiscal year, down sharply from the C$9.6 billion recorded in 2007-08 but beating the government's own prediction of a C$2.3 billion surplus.   Continued...