Ottawa Economic Statement | Update in a problematic context

(Ottawa) Finance Minister Chrystia Freeland will present her diagnosis of the health of the Canadian economy and the bleaker outlook she foresees for the coming months when she delivers her economic statement in the House of Commons on November 3.

Posted at 8:00 am

Joel-Denis Bellavance

Joel-Denis Bellavance
Press

Minister Freeland will present her economic statement in a very complex context. Inflation remains high, interest rates are rising, the economy is showing signs of slowing and the NDP, which secured a political deal to ensure the minority Liberals survive in the House of Commons until June 2025, is pushing for increased spending to strengthen the social safety net, including the employment insurance program.

The provinces are not left out either. They just launched a new national campaign to force Ottawa to substantially increase ($28 billion a year) health transfers while the health network is more fragile than ever after two years of the pandemic.

Mme Freeland also makes his announcement at a time when Ottawa’s financial situation is just beginning to improve. The federal government posted a budget surplus of $3.9 billion in the first five months of the 2022-2023 fiscal year (April to August) (see below), compared to a $57.2 billion deficit for the same period in 2021-2022.

Over the past few weeks, Minister Freeland has made many statements to set the stage for the announcement of bad news on the economic front.

She argued that Canada’s economy is set to undergo a new period of turbulence due to a sharp increase in the Bank of Canada’s key rate as it seeks to curb inflation, which remains above its target range of 2 to 3%.

This spike in interest rates will inevitably cause a slowdown that will affect families, workers and businesses, in addition to raising the cost of borrowing for those planning to buy a home or vehicle.

Help will not be for everyone

She also said the government won’t be able to provide everyone with financial support, as it did during the pandemic, and that Ottawa needs to impose more budgetary austerity on itself to avoid fueling “inflation.”

Finally, she advised her cabinet colleagues that they would have to tighten their belts. They will have to fund any new program they propose from their department’s regular budget.

But the minister never uttered the word “recession”, even though many economists say the country cannot avoid it.

This week, the Bank of Canada raised its key rate for the sixth time this year, with a half-point increase pushing its key rate to 3.75%.

In its latest monetary policy report, the institution revised its economic projections. It expects economic growth to stagnate through the end of this year and the first two quarters of 2023, with growth between 0 and 0.5% before picking up in the second quarter of 2023. next year. She also noted that a slight twitch is just as likely.


PHOTO ADRIAN WYLD, THE CANADIAN PRESS

Rachel Bendayan, Parliamentary Secretary to the Minister of Finance and Member of Parliament for Outremont, in the House of Commons on Friday

Parliamentary Secretary to Finance Minister Rachel Bendayan argued in the House of Commons on Friday that the economic statement will show the Trudeau government intends to exercise fiscal discipline. “This economic update will be fiscally responsible. We have one of the lowest deficits in the world. We are in a deficit of 1%. We were fiscally responsible in our April budget. We always will and we will be here for Canadians to help them get through this period of economic instability,” she said.

According to Robert Asselin, senior vice-president of the Business Council of Canada, fiscal discipline is especially important as the country faces high inflation, rising interest rates and weak economic growth.

“The focus now needs to be on fiscal prudence to ensure that the central bank can bring inflation back to its target range,” said Asselin, who was a close associate of former Finance Minister Bill Morneau.

3.9 billion surplus in Ottawa

The federal government posted a $3.9 billion surplus for the first five months of its 2022-2023 fiscal year. The Ministry of Finance said in its monthly financial overview that it recorded this surplus between the months of April and August, compared to a deficit of 57.2 billion during the same period last year. Government revenue for the period was $177.2 billion, up from nearly $149 billion a year earlier, thanks to a wide-ranging improvement. Program costs excluding net actuarial losses were $154.5 billion, compared to $190 billion in the same period last year. Public debt charges totaled nearly $14.8 billion over the period, up from nearly $9.7 billion. Net actuarial losses came in at nearly $4.1 billion, down from $6.4 billion a year earlier.

Canadian Press

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