OTTAWA – Finance Minister Jim Flaherty will deliver the federal budget on March 21, a plan that is expected to be an exercise in restraint as the minister remains focused on his goal of balancing the books by 2015.
Coming at a time of anemic economic growth, the budget is likely to stay the course of fiscal restraint, without any goodies.
However Flaherty downplayed the slower-than-expected economic growth Thursday as he announced the budget date.
“It’s an interim concern, it’s not a long-term concern in terms of real GDP growth and, as you know, our target is to balance the budget in 2015,” the minister said.
“We remain on target and I look forward to answering many more questions next Thursday after the budget.”
Real GDP grew at an annualized rate of just 0.6 per cent in the fourth quarter of 2012, suggesting the economy stalled in the second half of last year and fell short of many predictions.
During a meeting with private sector economists last week, Flaherty was told to expect real GDP growth of 1.5 per cent to 1.8 per cent in 2013.
That compared with the two per cent Ottawa forecast in its November update and the 2.4 per cent projection in last spring’s budget.
To make up for the shortfalls in government revenue because of the lower growth, the minister has suggested he may need to trim spending and close tax loopholes.
Flaherty has said he will not raise taxes or cut transfers to provinces.
Benjamin Tal, deputy chief economist of CIBC World Markets, said the goal of balancing the budget by 2015 is ambitious, but strong economic growth in 2014 would go a long way to helping the government hit its target.
“It is not a trivial loss of revenue as far as Finance is concerned,” Tal said of the disappointing growth estimates in 2013.
“It will require all kinds of actions, including cuts in spending.”
However Tal said he believes the cuts will not be as deep as many others might expect.
He said closing tax loopholes to raise revenue won’t be enough on their own to make up the shortfall, but it is “not a trivial number.”
“I think the hope is that 2014 will actually be a better year,” Tal said.
A report by the Organization for Economic Co-operation and Development this week suggested that Canada is in for a period of weak growth that will see the country lose its title as the best economic performer among big industrial countries.
However, prospects brightened a bit with the latest employment report, which showed the economy created 51,000 new jobs in February.