Bigger budget deficit expected as Canada's economic outlook downgraded

Parliament’s budget watchdog is warning of rougher economic waters ahead that will likely send the federal budget deeper into deficit.

In a new report this morning, the parliamentary budget office downgrades the country’s economic outlook compared to its projections from June, citing weaker exports because of trade disputes and protectionism.

Also factored into the downward economic outlook are spending cuts by Premier Jason Kenney’s government in Alberta.

The budget office’s report predicts the economic downshift will drive up the annual deficit by $1.6 billion, on average, through to 2025 — a number that doesn’t include any new policy decisions, or reflect promises made during this fall’s election campaign.

The worsened shortfall is the result, the budget office says, of lower tax revenues and higher operating expenses than had been expected.

The report warns that the actual deficits over the coming years will be bigger than the report projects, reducing the likelihood of balancing the budget in the 2024−2025 fiscal year.

Still, the parliamentary budget office predicts that the federal debt−to−GDP ratio, which compares government debt to the size of the overall economy, will continue to improve.