Economic statement: a deficit almost $22 billion higher than expected

The political chaos that occurred Monday morning in Ottawa, following the surprise resignation of Deputy Prime Minister and Minister of Finance, Chrystia Freeland, ultimately did not get the better of the federal government’s fall economic statement, which was presented to the House of Commons in the afternoon.

As expected, one of the budgetary safeguards that Ms. Freeland announced a year ago was abandoned. The objective of maintaining the deficit at a level of $40.1 billion for the year 2023-2024 will not be achieved; the budgetary shortfall increased to 61.9 billion.

The considerable increase in the deficit could be explained in particular by unexpected expensesindicates the document, in particular expenses linked to demands of indigenous peoples and to support payments paid during the COVID pandemic.

In 2023-2024, the government plans to record expenditures totaling approximately $16.4 billion, related to contingent liabilities for Indigenous claims and $4.7 billion related to the COVID-19 pandemic.we can read in the statement.

The deficit is larger than expected due to these one-time expensesexplained to - a senior official from the Ministry of Finance. Once these one-off expenditures are behind us, the deficit is expected to come back downindicated the senior official. Without this spending, the projected budget deficit would have been approximately $40.8 billion, compared to the $40 billion anticipated in the 2024 budget.

According to government forecasts, the budget balance would fall to $48.3 billion for the year 2024-2025 and would then increase to $42.2 billion in 2025-2026.

Furthermore, the second budgetary safeguard, that of maintaining the debt/GDP ratio at 42.1% for the 2023-2024 financial year, has been respected.

A week before her resignation, Ms. Freeland defended the Liberals’ management of federal finances, saying that a debt/debt ratioGDP falling by definition means that the government’s fiscal situation is sustainable.

The resigning minister announced these budgetary anchors last year in response to pressure from the Bank of Canada and economists to avoid fueling inflation with excessive spending.

New measures

Few new developments emerge from this 323-page document, but what emerges is a clear desire on the part of the Liberal government to face the return of American President-designate Donald Trump to the White House.

The total net incremental impact of the new measures announced in the 2024 Fall Economic Statement is $21.1 billion over six yearswe can read in the document. This sum includes new investments announced including measures to reduce the daily cost of living, build more housing and promote growth based on carbon neutrality.

The federal government’s economic statement is based on these three key objectivesthe senior official from the Ministry of Finance told journalists present in Ottawa for the presentation of the document.

Among the measures announced Monday, several appear to have been adopted to deal with threats from US President-elect Donald Trump. The latter notably threatens to impose customs tariffs of 25% on all products coming from Canada and Mexico unless the two countries act to stop the influx ofillegal immigrants and fentanyl.

The Canadian government plans to spend $1.3 billion to protect the border with the United States. This amount would thus be intended for Public Safety Canada, the Canada Border Services Agency, the Communications Security Establishment Canada and the Royal Canadian Mounted Police.

We will make it clear that attempts to bypass border checkpoints or enter the country through illegal routes are blockedwe can read in the statement.

We will invest in cutting-edge technology, empower law enforcement, and ensure that only those authorized to stay in Canada remain.

Still with the aim of confronting Mr. Trump’s threats, the government plans to encourage investments in the country and, above all, to avoid capital flight.

In its economic statement, the federal government plans to spend $17.4 billion over six years to extend the accelerated investment incentive, as well as the immediate expensing of manufacturing or processing machinery and equipment, clean energy generation or energy conservation equipment, and zero-emission vehicles.

The government is taking steps now to promote Canada’s competitiveness, while closely monitoring the progress of any tax reform in the United States.

The Liberal government also plans to spend $1.1 billion to increase tax incentives for scientific research and experimental development.

Finally, with regard to the fight against the cost of living and alleviating its impact on Canadians’ wallets, the fall economic statement includes the sum of $1.6 billion resulting from the product tax holiday and services (GST) to all Canadians. This measure, which came into force this weekend, must continue until mid-February.

However, the statement made no mention of the $250 checks the government planned to send to Canadian workers earning less than $150,000 a year. This measure, which was severely criticized by the opposition because it does not take retirees into account, was removed from the initial bill in order to be debated longer.

In her resignation letter, Ms. Freeland noted disagreements with Prime Minister Justin Trudeau, calling on him to avoid costly political gimmicks that we cannot afford and that make Canadians doubt that we recognize how serious this moment is.

It is the Minister of Public Safety, Dominic LeBlanc, who replaces Ms. Freeland at the head of the Ministry of Finance. He was sworn in on Monday, when the fall economic statement was tabled in the House of Commons.