World Economic outlook - Canada Economic growth outlook 2012 - 2013 : Canada's parliamentary budget officer is predicting slower economic growth and higher unemployment than the Harper government and says the country probably won't balance its books until 2016-17 at the earliest.
In a report released Tuesday, Kevin Page, the government spending watchdog, has substantially downgraded his economic and fiscal forecasts from earlier this year. He offers a more conservative assessment of the country's economy than the Tory government.
The Office of the Parliamentary Budget Officer now expects real growth in gross domestic product to reach 2.2 per cent this year — down from a spring projection of 2.9 per cent — and only 1.5 per cent in 2012, significantly less than the 2.2 per cent originally envisioned.
Economic growth in 2013 is now expected to be 2.1 per cent, down slightly from the 2.3 per cent predicted earlier this year, according to the budget officer.
"The global economic outlook has deteriorated since (the budget officer's) June economic and fiscal outlook," the report says, noting the sovereign debt crisis in Europe, weaker commodity prices and sluggish U.S. economy.
"Taken together, these developments have led (the budget officer) to revise down the outlook for the Canadian economy relative to its June 2011 (report)."
The assessment compares to updated federal government projections — based on the average of more than a dozen private-sector economists — of 2.2 per cent this year, 2.1 per cent in 2012 and 2.5 per cent in 2013.
The slower-than-expected growth is likely to increase unemployment to eight per cent in 2012 and 2013 (compared to 7.4 per cent this year), the report notes, and generate smaller federal tax revenues, making it almost impossible for the government to meet its target of balancing the books by 2014-15.
Indeed, in releasing Ottawa's updated economic forecast last week, Finance Minister Jim Flaherty hinted the government may not be able to eliminate the deficit by 2014-15, instead promising to do it over the "medium term."
The budget officer estimates the government will run a deficit of $18.7 billion in 2014-15, of $13.1 billion in 2015-16 and of $7.3 billion in 2016-17. The office predicts the government has a 10 per cent shot of returning to surplus by 2014-15, approximately one-in-four shot in 2015-16 and a 40 per cent chance of balancing the books by 2016-17.
On a positive note for consumers, the watchdog expects the Bank of Canada will maintain its key lending rate at one per cent through the third quarter of 2013 before gradually raising rates.
The office notes the government is reducing its structural deficit and that budgetary revenues will continue to grow faster than expenses in the coming years.
However, the watchdog is still warning that the federal government is on shaky financial ground over the long term, partly due to an aging population, and will need to either increase taxes or chop spending to resolve its budgetary challenges.
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