(Ottawa) The federal deficit could melt like snow in the sun in 2022-2023, thanks to the good performance of the Canadian economy and a high inflation rate.
Posted at 6:00 a.m.
During the first two months of the current fiscal year, the federal government unexpectedly recorded a surplus of $5.3 billion, compared to a deficit of $23.8 billion during the first two months of the previous fiscal year, reveals the most recent financial review of the Ministère des Finances.
This is a spectacular turnaround in the state of public finances in Ottawa, which points to a much smaller deficit than the $54 billion forecast in the last budget, tabled by Minister Chrystia Freeland on April 7.
Mme Freeland then projected a $52.8 billion deficit for the entire 2022-23 fiscal year. But if the trend continues, it could melt like snow in the sun and reach only 16 billion, according to Finances of the Nation, an organization which closely follows the evolution of the finances of the federal government and the provinces.
A $16 billion deficit would be a huge reduction from what was forecast in the budget.
Trevor Tombe, professor of economics at the University of Calgary, who participates in the work of Finances of the Nation
A return to balanced budgets also seems possible after years of budgets marked in red ink if the Trudeau government imposes greater budgetary discipline and the Canadian economy does not sink into a deep recession.
At the height of the economic crisis caused by the COVID-19 pandemic, the federal government recorded a record deficit of $327 billion in 2020-2021 in order to fund, in particular, emergency aid programs to support families, workers and businesses during the health crisis. The deficit then settled at 113.8 billion in 2021-2022.
Strong increase in revenue
During the first two months of the current fiscal year, the federal tax authorities pocketed $71.7 billion in revenue, an increase of $12.1 billion (20.3%) compared to the same period in 2021-2022. The end of the deconfinement measures and inflation explain this sharp increase in income.
Revenues from the GST increased by 29.4% during the first two months of the fiscal year compared to the same period of the previous fiscal year, rising from $7.4 billion to $9.6 billion. Revenues from this tax, which applies to goods and services, are likely to rise rapidly when inflation is on the rise. Inflation hit 8.1% in June, a peak in almost 40 years.
The government’s financial results for 2022-23 continue to show improvement from the most critical point of the pandemic and the unprecedented level of temporary COVID-19 support measures taken at that time.
Adrienne Vaupshas, press secretary to the Minister of Finance
A government source, however, pointed out that during the first three years in power of the Liberals (2015-2016, 2016-2017 and 2018-2019), Ottawa also posted a surplus in May, but that we still ended each of these years. in deficit since expenditures are generally oriented towards the end of the financial year.
In fact, significant payments due by the end of the fiscal year were not applied during the first two months, including payments related to early learning and child care, the community development Canada, home care and mental health, among other things.
Conservatives and Bloc Québécois criticize
The Conservative Party says these financial results show that the Trudeau government is raking in extra money on the backs of families who are struggling to make ends meet their monthly budget because of the rising cost of living.
“That’s exactly what we expected. We knew that the government was going to rake in additional money, mainly because of inflation. That is why he was asked to help Canadians who have to pay more for everything. We wanted him to offer a GST holiday, to offer a break on the increase in the carbon tax. But he refused each time to pay for his out-of-control expenses and to satisfy the wishes of the NDP,” said Deputy Conservative Party Leader Luc Berthold.
The Bloc Québécois was also critical. “Liberals who have watched the inflationary storm pass for months and refuse to lift a finger now have no more excuses. This budget surplus, which is largely explained by the increase in revenue linked to inflation, proves that the federal government not only has the leeway required to adequately fund our health care system, but also has the means to give a bit of ballast for citizens who must tighten their belts more than ever,” argued MP Gabriel Ste-Marie, Bloc Québécois finance critic.