Deficit likely surpassed Liberal pledge for $40B cap this past year: PBO

globalnews.ca:

The federal government likely failed to keep its deficit below the promised $40-billion cap in the last fiscal year, the parliamentary budget officer said on Thursday.

The budget watchdog estimates in its latest economic and fiscal outlook that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

“Based on our analysis, the government will not meet its fiscal commitment to keep the deficit below $40 billion in 2023-24,” Yves Giroux said.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at that level, and said in her spring budget it would stay in line with the promise.

The new fiscal guardrail was part of an effort to quell fears that high government spending would fuel price growth and work at odds with the Bank of Canada’s inflation-taming efforts.

A spokeswoman for Freeland would not say whether the federal government still expects to meet its fiscal guardrail on Thursday.

“Our federal government is making historic investments in the priorities of Canadians — in housing, affordability, and economic growth — and we are doing this in (a) fiscally responsible way,” Katherine Cuplinskas said in a statement.

Assuming no new measures are announced, the PBO forecasts the federal deficit to decrease slightly to $46.4 billion for the 2024-25 fiscal year.

Meanwhile, the PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

The report forecasts real gross domestic product will grow by 2.2 per cent in 2025, up from a projected