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OTTAWA — The new Liberal government says the federal books it inherited from its Conservative predecessors are on track to be billions of dollars deeper in the hole than expected.
But Finance Minister Bill Morneau maintains the government will fulfil its pledge to balance the books before the next election, despite the higher fiscal obstacles.
In its first fiscal update since taking power, the Liberal government says it will have to contend with an updated fiscal baseline about $6 billion lower per year than the forecasts contained in the Conservatives’ April budget.
The calculations in the update do not account for the big-ticket spending promises in the Liberal platform, nor do they factor in the potential benefits the government expects from the stimulus.
“The road ahead is challenging, but it is also one of opportunity,” Morneau said in a statement.
During the election campaign, the Liberals 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. They anticipated a small surplus in the fourth year.
In the fiscal update, the government says economic conditions have deteriorated since the April budget because of higher expenses and lower revenues tied in part to stubbornly low commodity prices and global uncertainty.
The update also contains average forecasts made last month by private-sector economists.
The economists downgraded the April projections for real gross domestic product — the common measure of economic growth — to an average of 1.9 per cent from 2015 to 2019, down from 2.1 per cent.
They also lowered their predictions for crude oil prices to an average of US$61 a barrel from 2015 to 2019, down from the US$70 they used in April.
