Canada Conference Board Forecasts Ottawa Could Cut Deficit Early

Ottawa, Ontario, Canada (AHN) – A Conference Board of Canada analysis says because of the swift economic recovery being experienced by Canada, Ottawa could cut its budget deficit one year ahead of schedule.

According to Glen Hodgson, the Board’s senior vice president, and Matthew Steward, its senior economist, the country may even register a $5 billion surplus within five years. Under the timetable submitted by Finance Minister Jim Flaherty in the March budget, the federal government projected a $1.8 billion deficit by 2014-15, the final year of the projection.

When Flaherty made his five-year forecast, the projection was criticized as being too optimistic. One of the critics was Parliamentary Budget Office Kevin Page, who said the federal government could not erase the deficit if Ottawa does not hike taxes or reduce program spending.

Hodgson and Steward said their optimism was based on the fact that even when the global financial crisis and recession started, Canada was in better fiscal shape than other industrial nations. The two attributed that to Canada spending a decade paying down its debts so that by fiscal year 2008-09, Ottawa’s debt-to-gross domestic product ratio dipped to 29 percent from 68 percent in FY 1995-96.

Hodgson and Steward wrote, “Canada’s fiscal approach created room to maneuver when the recession began and its own deficits began to increase—something governments in other countries just don’t have.”

However, the two economists foresaw some Canadian provinces would still experience difficulty balancing their books because of rising health care costs.

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