Federal government on track to balance the budget, but work still needs to be done
Ottawa, November 27, 2013 – Following subpar growth in 2012 and 2013, Canada’s economy is expected to grow by close to 2.5 per cent annually over the next two years, according to the Conference Board of Canada's Canadian Outlook-Autumn 2013.
- Real gross domestic product (GDP) is expected to grow by a tepid 1.8 per cent in 2013.
- Although risks to the global economy remain elevated, an acceleration in Canada’s export volumes is expected to power higher GDP growth in 2014 and 2015.
- The federal government and every province except Saskatchewan ran a fiscal deficit last year. All jurisdictions have plans to restore a balanced budget in the medium term, but rebalancing the books is not automatic.
The federal government announced in October that its 2012-13 deficit had come in at $18.9 billion, $7 billion less than its target. Yet, balancing the books in 2015–16 will remain a challenge. Low inflation means that the federal government is likely to take in lower-than-forecast revenues during the 2014 to 2016 period. As a result, the federal government may have little or no revenue cushion to meet its balanced budget objective, and will have to maintain its program of spending restraint in government operations.
"The federal government is essentially a year ahead of its deficit-reduction schedule," said Pedro Antunes, Director, National and Provincial Forecast. "Although the government is well on its way to balancing its books, it will have to keep a tight rein on spending if it is to arrive at a balanced budget on schedule."
Stronger growth in real gross domestic product is expected to come in part from an acceleration in export volumes. The export sector started strongly in 2013, but weakened as the year went on — overall growth in exports is expected to come in at just 1.4 per cent this year.
Better times are in store over the next two years, due to improved outlooks for the U.S. and global economies. Total exports are forecast to grow by 3.7 per cent in 2014 and 4 per cent in 2015.
In addition, the domestic economy should keep humming along in 2014 and 2015 thanks to low interest rates and improving business and consumer confidence.