OTTAWA — The new Liberal government will finally crack open the federal books Friday, giving Canadians their first glimpse at the state of public finances since last month’s federal election.
Finance Minister Bill Morneau’s release of the fiscal and economic update will also mark the public’s first opportunity to scrutinize the Finance Department’s numbers since the federal budget in April.
Much has changed in that time.
Over the months, a cascade of downgraded economic growth projections have poured cold water on the more optimistic spring predictions that were put forward by the former Conservative government.
Morneau’s update will come as Canada continues to try to shake off the negative effects of low oil prices and the squeeze of a sluggish world economy.
Earlier this month, a report by the federal budget watchdog lowered its growth outlook for Canada and warned eroding economic conditions could drive the country into deeper deficits. Like the Bank of Canada and other experts, the parliamentary budget office blamed persistently low oil prices and weaker-than-expected global growth.
A bleaker fiscal outlook could complicate matters for Liberals as they try to keep projected budgetary deficits from ballooning.
Justin Trudeau’s Liberals won the October election after pledging to roll out large spending plans in areas such as infrastructure, which the party argued will resuscitate economic growth and create jobs.
In doing so, the Liberals also vowed to run annual deficits of just under $10 billion over the next two years with a shortfall of about $5.7 billion in the third year before balancing the books in time for the next election.
The economic forecast has worsened since the election, but Morneau has said the new government will stick to the plan for now.
Earlier this month, he said it was “way premature” for any decision on whether the government would modify campaign commitments because of the state of the economy.
One of Morneau’s cabinet colleagues, however, went further the following day when asked about the fiscal situation the Liberals have inherited from their Conservative predecessors.
“We inherited from the previous government a bare cupboard.”
Treasury Board President Scott Brison suggested the Liberal government may have to make adjustments to live up to its election vows.
“We will deal with, first of all, addressing the fact that we inherited from the previous government a bare cupboard,” Brison said when asked whether future deficits exceeding $10 billion were out of the question.
The Finance Department said Friday’s calculations won’t include measures the Liberals have pledged to adopt.
In April, the Conservative government presented a fiscal plan that forecasted surpluses of $1.4 billion in 2015-16, $1.7 billion in 2016-17, $2.6 billion in 2017-18 and 2018-19 and $4.8 billion in 2019-20.
Those numbers were based in part on predictions for real gross domestic product — a measure of economic growth — provided in March by private-sector economists. At the time, their average forecast said real GDP would increase by two per cent this year, 2.2 per cent in 2016, 2.3 per cent in 2017, 2.2 per cent in 2018 and two per cent in 2019.
Since then, however, experts have lowered their growth expectations for Canada.
Last month, the Bank of Canada projected GDP growth of 1.1 per cent this year, two per cent in 2016 and 2.5 per cent in 2017.
The parliamentary budget office updated its fiscal numbers earlier this month after lowering its fiscal outlook due to deteriorating growth, low commodity prices and shrinking revenues.
The weaker economic position, the budget office said, would siphon billions of dollars from the federal government’s fiscal baseline — by $3.6 billion in 2016-17 and by $6.9 billion in 2017-18. Once the Liberals’ promised deficits are factored in, that could mean federal shortfalls of more than $13 billion in 2016-17 and more than $16 billion in 2017-18.