Canada budget sees C$85 billion deficit over 5 years

Wed Jan 28, 2009 9:31am EST
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OTTAWA (Reuters) - The government of Canada predicted on Tuesday budget deficits totaling C$85 billion ($69 billion) over five years - the result of a recession and a C$40 billion two-year stimulus package packed with infrastructure spending, tax cuts and targeted loans.

The spending plan, which Ottawa says would boost gross domestic product by 1.4 percent this year and create 190,000 jobs by 2011, pushes Canada into a C$1.1 billion budget deficit in the current 2008-09 fiscal year, which ends in March, after 11 straight years of surplus.

It had projected a small surplus for this year before the stimulus plan.

The projected deficit for 2009-10 fiscal year is C$33.7 billion, followed by a 2010-11 deficit of C$29.8 billion and smaller deficits the two following years. Ottawa foresees a return to surplus in 2013-14, with a surplus of C$700 million forecast for that year.

"The government has designed its economic action plan to concentrate new spending in 2009-10 and 2010-11, when the economy is expected to be weak," the government said in its budget document.

"Starting in 2011-12, the fiscal position of the government is projected to improve rapidly, as time-limited stimulus measures expire and the economy recovers," it said.

Canada's debt-to-GDP ratio, the lowest in the Group of Seven major industrialized economies, is expected to rise to 32.1 percent by 2010-11 from the estimated level of 28.6 percent in 2008-09. It is then projected to return to 2008 levels five years out.

($1=$1.23 Canadian) (Reporting by Louise Egan; Editing by Peter Galloway)

<p>Finance Minister Jim Flaherty pauses as delivers his budget in the House of Commons on Parliament Hill in Ottawa January 27, 2009. REUTERS/Chris Wattie</p>