The Parliamentary Budget Officer has lowered his forecast for economic growth this year.
The latest economic and fiscal outlook from the Parliamentary Budget Officer (PBO), released Thursday, projects growth of 1% this year, followed by 1.6% in 2024. This outlook compares to October forecasts of growth of 1.2% in 2023 and 2.3% in 2024.
He expects lower residential investment and weaker consumer spending in the first half of the year, while businesses reduce inventory investment through 2023 as sales growth slows. .
PBO expects the Bank of Canada to observe its “pause”, keeping the key rate at 4.5% until the end of December of this year. “As consumer price index inflation is on track to return to its 2% target, we expect the Bank to begin cutting its policy rate in January 2024 and then back to its estimated neutral level of 2.5% in December 2024,” he adds.
PBO’s outlook projects a federal budget deficit of $36.5 billion for Ottawa’s fiscal year 2022-23 and an increase in the deficit to $43.1 billion for 2023-24 due to slower growth in revenue and increased program spending.
Under a status quo policy, the federal debt-to-GDP ratio is projected to decline to 41.8% in 2022-23, then temporarily rise to 42.2% in 2023-24. “Assuming no new measures are taken and existing temporary measures end as planned, the federal debt ratio is projected to decline to 38.1% in 2027-28. However, it is expected to remain above its pre-pandemic level, which was 31.2% of GDP in 2019-20. »
PBO projects that the debt service ratio (i.e. public debt charges to tax revenue) will peak at 11.5% in 2023-24 under a status quo policy. Then, it will gradually decrease to 10.3% in 2027-2028, two percentage points higher than the lowest level recorded before the pandemic, namely 8.3% in 2018-2019.
“We believe that the most significant risk is a serious slowdown in the global economy [notamment en raison d’une intensification de la guerre en Ukraine ou d’un resserrement excessif de la politique monétaire par les grandes banques centrales]which would hurt the Canadian economy and federal finances,” writes the PBO.
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