I wanted to share a report from TD Economics in regards to the larger and more persistent federal budget deficits expected well into 2017. The main causes for the increased deficits appear to be a slowing of economic growth from what was projected by Finance Minister Bill Morneau when the budget was first released in March.
As per the same report, the deficit is on track to reach $34 billion – a full $5 billion higher than originally projected. What this could mean for Canadians moving forward is the potential need for further stimulus from the Government to maintain 1-1.5% of economic growth per year at the expense of maintaining the deficit at those higher projected values. Unfortunately, operating at a higher than expected deficit limits the Federal government’s ability to increase additional spending since they won’t be left with much – if any – wiggle room.
I have also attached an article from Theophilos Argitis at Bloomberg.com as well as a video from economist Benjamin Tal further breaking down potential impacts to an increased deficit.