Canada's November budget gap soars on weak economy

Fri Jan 22, 2010 12:01pm EST
 
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OTTAWA (Reuters) - A weaker economy and emergency stimulus spending pushed Canada to a budget deficit of C$4.36 billion ($4.11 billion) in November from a surplus of C$0.10 billion in November 2008, the government said on Friday.

It also said that for the first eight months of the fiscal year that started in April, the deficit ballooned to C$36.30 billion from a C$0.04 billion surplus for the same period in 2008.

Almost C$13 billion of the accumulated deficit for the year was due to the first phase of the government's two-year, C$47 billion stimulus plan. Most of the stimulus programs will be cut off at the end of the 2010-11 fiscal year or sooner, but others, such as tax cuts, are permanent.

In November 2009, overall revenue fell by C$2.2 billion, or 11.6 percent, from November 2008. Personal income tax revenues decreased by C$1.0 billion, or 10.9 percent, while corporate income taxes were down C$0.8 billion, or 36.1 percent.

Ottawa says it expects much of the deficit to disappear when economic recovery boosts tax intake and its extraordinary spending measures end.

"Personal income tax revenues are expected to remain weak through the remainder of 2009 and then begin to rise year-over-year in the first quarter of 2010, reflecting projected wage growth and the expiration of the home renovation tax credit at the end of January 2010," the finance department said in its monthly report.

The government says the deficit this year will be C$55.9 billion.

($1=$1.06 Canadian)

(Reporting by David Ljunggren; editing by Peter Galloway)

 
<p>Canadian one hundred dollar bills are displayed in Toronto, October 22, 2008. REUTERS/Mark Blinch</p>