The parliamentary budget officer (PBO) says that the deficit will be smaller than expected, but the lack of clarity of the liberal government on fiscal planning has left the Yves Giroux office, unable to determine whether government spending plans are sustainable.
The economic and prosecutor monitor published by the Giroux office on Thursday morning says that the deficit for 2024-25 will be $ 46 billion, $ 4.3 billion lower than he had predicted during the elections and $ 2.3 billion lower than what was estimated in the autumn economic statement.
“The review of our estimated deficit reflects an increase of $ 5.2 billion in our income estimate in 2024-25, something compensated for an increase of $ 1 billion in our estimation of expenses,” the report said.
The PBO said that although it predicted that the Canadian economy would only grow by 1.8 percent in the fourth quarter of 2024 and 1.6 percent in the first three months of the year, the real gross domestic product grew at an annualized rate of 2.1 percent and 2.2 percent.
The report says that the improved fiscal position of the federal government can be explained by the income of the strongest corporate income tax than expected and the money collected from Canada’s counter-tarifa over US assets.
The improved growth in the first three months of the year, said the Giroux office, can be explained in part by the companies that rush inventory before the tariffs were imposed.
The PBO predicts that the real growth of GDP in the second quarter of 2025 will probably remain stable, with an expected decrease in exports that act as a ballast of the economy.
“Business investment is also expected to remain moderate due to high uncertainty,” the report said.
Fiscal sustainability
During the electoral campaign, Prime Minister Mark Carney announced his plan to separate the “operational expense”, the daily operation of government programs and departments, “capital expenditure”, which is anything that builds an asset that the Government possesses.
The liberal platform promised that it would reduce the growth of government spending from nine to two percent by eliminating waste, duplication and technology deployment to balance operating spending by 2028.
But the PBO says that the liberal government has complicated its ability to track that fiscal anchor by not explaining how it will define operational and capital spending.
“Therefore, the PBO cannot evaluate whether the recent fiscal policy initiatives of the Government presented in the Parliament … are consistent with achieving their new fiscal objective,” the report said.
Due to the lack of clarity, government spending plans could be fiscally unsustainable, said Giroux’s office.
“Parliamentarians can want to seek additional clarity on how the Government plans to measure its fiscal anchor and how will it ensure that federal finances remain sustainable.
