January 28, 2009 / 2:35 PM / 9 years ago

Canada budget sees C$85 billion deficit over 5 years

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.

<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>

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

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