OTTAWA (Reuters) - The Canadian government is unlikely to balance its budget in 2013-14 as promised because of a weaker economy and new spending measures such as the auto bailout, the country’s budget officer said on Monday.
In a report released to the House of Commons finance committee and obtained by Reuters, the independent parliamentary budget officer (PBO), Kevin Page, estimated a cumulative deficit over five years of C$155.9 billion ($134.4 billion).
Page forecasts a deficit of C$48.6 billion this year, slightly lower than the government’s latest estimate, released last month, of C$50.2 billion.
But for the following four years, Page expects the shortfalls to be substantially larger than those laid out by the government and sees a C$16.7 billion deficit in 2013-14 -- the year the government has pledged to return to a surplus.
For the near term, Page attributed the discrepancy to new spending plans announced since January, including C$8 billion in aid to automakers. For the final two fiscal years of his outlook, Page said the deficits were structural and the result of lower income tax revenues.
“Although there is a high degree of uncertainty surrounding estimates of potential output and structural budget balances, PBO’s calculations suggest that the budget is not structurally balanced over the medium term,” according to the report.
The main opposition party, the Liberals, said the report shows that Canadians are in a deeper fiscal hole than Finance Minister Jim Flaherty would have them believe.
“It’s time for Minister Flaherty to come clean about the sorry state of the deficit,” said Liberal legislator John McCallum in a statement.
“As recently as three weeks ago, the minister still clung to his five-year targets from January. Now we learn that the Conservatives have driven Canada into a $17 billion structural deficit and there is no credible plan to dig Canada out of the hole,” he said.
Prime Minister Stephen Harper has in the past downplayed the PBO’s reports and their potential impact on policy, saying they should be treated as any other interim forecast made by the private sector.
The PBO’s economic outlook, based on private sector forecasters, calls for a 2.4 percent decline in real gross domestic product this year -- similar to the government’s estimate of a 2.5 percent fall.
But Page sees nominal GDP, which is crucial for budgeting because it represents the broadest measure of the tax base, as faring worse than the government predicted with a 4.8 percent fall this year compared with the government’s forecast of a 4.3 percent decline.
The outlook for the jobless rate is also more gloomy, averaging 8.7 percent this year versus the government’s estimate of 7.5 percent.
Reporting by Louise Egan; editing by Peter Galloway