The federal government ran a $1.9-billion deficit in October, pushing Ottawa’s year-to-date finances slightly into the red, the Finance Department reported Friday.
The seven-month year-to-date tally shows a small deficit of $174-million over the April-to-October period. Previously, strong monthly surpluses at the start of the fiscal year had kept the government’s year-to-date numbers in a surplus position.
The small deficit to date is a dramatic improvement over the same seven-month period one year earlier, when Ottawa ran a $72.3-billion deficit.
This year’s October deficit was an improvement over the $3.7-billion deficit recorded in October, 2021.
“The government’s 2022-23 financial results continue to improve compared to 2021-22 as the fiscal impact of the COVID-19 crisis and the unprecedented level of temporary COVID-19 response measures wane,” the department said in its monthly Fiscal Monitor report.
Finance Minister Chrystia Freeland’s fall economic statement, released Nov. 3, projected that the 2022-23 deficit would be $36.4-billion under a “baseline scenario” or $49.1-billion under a “downside scenario” in which various risks materialize.
While the monthly deficit figures suggest Ottawa is currently on track to beat its baseline deficit target, there are two important caveats. One is that Ottawa tends to backload federal spending into the final months of the fiscal year. Second is the fact that the Canadian economy is expected to stall or even slip into recession in 2023 as the impact of several interest rate hikes by the Bank of Canada is more sharply felt.
A survey of economists’ projections released this week by FocusEconomics found the average growth forecast for 2023 is 0.4 per cent. The surveyed analysts project a rebound in 2024, with growth of 1.6 per cent.
“The economy will come close to stagnation next year on elevated interest rates and slowdowns abroad,” the FocusEconomics report states. “A prolonged housing market correction, sticky inflation, and more-aggressive-than-expected rate hikes domestically and in the U.S. are downside risks.”
Statistics Canada reported Friday that the Canadian economy grew by 0.1 per cent in October.
The Finance Department launched consultations on Dec. 14 seeking suggestions in advance of the 2023 budget, which has not been scheduled.
The consultations include a questionnaire asking participants to select top five and bottom five priorities from a long list of policy options.
The introduction says the government is seeking ideas about how to help Canadians succeed while building a “stronger, greener, more competitive, more innovative, and more inclusive Canadian economy.”
Canadian business leaders have urged Ms. Freeland to table an early 2023 budget, given that the fall update referenced nearly a dozen business-focused policies that would be further clarified in the budget.
Specifically, the Business Council of Canada said chief executive officers are seeking clarity on promised government programs aimed at responding to a host of new green-energy investment incentives being offered to U.S. companies after the adoption of the Inflation Reduction Act.
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Bill Curry