Federal government to table fiscal update next week

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The federal government’s fall economic statement will be tabled on Dec. 16, Finance Minister Chrystia Freeland said on Monday.

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The update on Ottawa’s finances comes as there are growing concerns over Canada’s economic competitiveness, in particular its falling productivity, business investment and GDP-per-capita levels.

The uncertainty around an incoming second Trump administration in the United States and the impact of a proposed 25-per-cent tariff on Canadian exports has economic forecasters reconsidering Canada’s growth numbers over the next two years. In addition, Canada’s plans to slash immigration and temporary foreign worker levels could have an impact.

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That could pose a problem for the federal deficit. A report by Canada’s budget watchdog in October projected that the federal government would not meet its pledge to keep the deficit below $40.1 billion. The Parliamentary Budget Officer forecast a $46.4 billion deficit this fiscal year, above the $39.8 billion shortfall initially estimated in the federal budget last spring.

Similarly, economists in the private sector are also expecting a larger-than-promised deficit. Desjardins Group estimates the deficit will reach $46.5 billion.

There have also been a number of added costs since those estimates of the deficit were made, such as the federal government’s recently introduced tax holiday, where the GST/HST won’t be collected for two months. The PBO estimates this could potentially cost the federal government $2.7 billion if provinces with a harmonized sales tax asked for compensation.

Additional resources promised to support the Canadian border could also potentially add to the budget shortfall.

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Following the announcement, business groups were already cautioning the federal government to show restraint.

“Canada faces significant economic and fiscal challenges, including low innovation and productivity, an aging population and geopolitical pressures that could disrupt trade flows. In this environment, fiscal prudence is essential,” said Robert Asselin, senior vice-president of the Business Council of Canada.

“Unfortunately, this government has consistently failed to meet its fiscal targets and lacks a coherent strategy to foster private investment.”

• Email: jgowling@postmedia.com

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