Recent bleak economic numbers have led analysts to begin lowering their economic forecasts, and could provide Ottawa breathing space ahead of its Mar. 19 budget
OTTAWA — A weakening economy could give Finance Minister Bill Morneau room to spend big in his pre-election budget later this month, even after he ignored calls to reduce the deficit while the Canadian economy was running strong.
“If the focus earlier had been on slashing the deficit, I’d say given the soft patch we’re going through, both in Canada and globally, perhaps that shouldn’t be the top priority at this point,” said Doug Porter, chief economist at BMO Financial Group. Some observers, including Porter, had warned Ottawa against indulging in higher spending when the economy was at full capacity, saying Morneau should instead leave money aside to prepare for an eventual downturn.
“They made no progress on the deficit over the mandate, of course, and just as election approaches the economy seems to be softening.” However, Ottawa will also be helped along by a much lower-than-expected deficit last year, which came in around $10 billion, according to Avery Shenfeld, lead economist at CIBC. That could be used to expand the child benefit tax or funnelled into skills and training programs, for example.CIBC revised its economic forecast for 2019 to 1.6 per cent, down from 1.8 per cent.
“Although we figured the economy was in for a detour at the end of last year, that detour may wind up being longer than we had expected,” she said.
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