The federal government will release an economic statement next week, Thursday, November 3, amid growing fears of a recession. Deputy Prime Minister and Finance Minister Chrystia Freeland made the announcement Friday morning on Twitter.
On Thursday, November 3, I will present the Fall Economic Statement: Our plan to continue building an economy that works for everyone.
— Chrystia Freeland (@cafreeland) October 28, 2022
After more than two years overshadowed by the pandemic — and emergency measures that weighed on government spending — Ottawa must now deal with the possibility of a recession in early 2023.
It must be said that the current monetary policy, based on a strong rise in interest rates to tame high inflation, is weighing on the outlook for growth in Canada’s gross domestic product (GDP) — as the Bank of Canada pointed out. in its report presented on Wednesday.
“The Bank expects GDP growth to slow from 3.25% this year to just under 1% next year and 2% in 2024,” it said. Ottawa will have to come to terms with this new reality.
On Wednesday, in addition to presenting its report on monetary policy, the Bank of Canada also raised its key rate by half a percentage point, taking it to 3.75%. A gesture that is not without consequences for federal public finances: such an increase increases the cost of servicing the debt, thus reducing the State’s budgetary room for manoeuvre.
At a time when inflation is swallowing up household purchasing power, this economic update should also be marked by measures to help Canadians cope with the rising cost of living. In September, the federal government already proposed three temporary programs for this purpose: assistance for dental care for children under 12 whose parents earn less than $90,000 a year; a lump sum of $500 for the poorest Canadians who spend more than 30% of their income to pay their rent; as well as a doubling of the GST credit for 6 months. The bill to double the GST credit has already been passed, while the other two are still before Parliament.
A surplus in public finances
The Ministry of Finance also released its monthly financial review on Friday. The federal government recorded a surplus of $3.9 billion for the first five months of its 2022-2023 fiscal year, i.e. between April and August. At the same time last year, it recorded a deficit of $57.2 billion.
Government revenue for this period totaled $177.2 billion, up from about $149 billion a year ago.
Program expenses excluding net actuarial losses amounted to $154.5 billion, compared to $190 billion in the same period last year, it also says. A decrease of 18.7%, mainly due to the drop in transfer payments to individuals and businesses caused by the end of the measures related to COVID-19.
Public debt charges, meanwhile, totaled nearly $14.8 billion for the period, a 52.8% increase due to higher interest rates and higher adjustments to the value of real return bonds due to inflation.