OTTAWA (Reuters) - It will take Canada two years longer than expected to eliminate its budget deficit because global uncertainty is weighing heavily on domestic economic growth, Toronto-Dominion Bank said on Thursday.
TD projects the federal government will balance its budget in 2016-17 instead of 2014-15 as the Conservative government has promised.
TD said the delay would not significantly change Canada’s overall debt profile. It should not alarm investors, nor should Ottawa take additional austerity measures to meet its self-imposed deadline, the bank said.
“Neither knee-jerk reaction seems warranted as deficits for 2014-15 and 2015-16 are just 0.3 percent and 0.1 percent of GDP, respectively,” said the TD report, which was written by Derek Burleton, vice president and deputy chief economist, and by economist Sonya Gulati.
“Investors and markets should remain confident that a medium-term plan is firmly in place to return to surplus.”
Earlier this week, Finance Minister Jim Flaherty revised lower the economic growth forecasts that underpin the government’s budget projections to 2.2 percent for this year from 2.9 percent, and to 2.1 percent for next year, down from 2.8 percent.
Flaherty pledged to balance the budget in the “medium term” but refrained from naming the precise year.
Reporting by Louise Egan; editing by Peter Galloway