Flaherty to unveil update on economy and government finances Tuesday

OTTAWA – Finance Minister Jim Flaherty is issuing the fall economic update on Tuesday, a mid-term report card many expect will show a modest deterioration in the government’s finances.

The report will be released at noon ET in Ottawa and in Fredericton, where Flaherty is speaking to the local chamber of commerce.

A senior government official said Canadians should not expect any big surprises in the update, such as new tax or spend measures.

Last month, Flaherty revealed government revenues had been lower than expected due to an average five per cent drop in the global price of resource commodities that Canada exports to the world.

In terms of growth, Flaherty is using a new, lower economic consensus forecast for real gross domestic product growth and also inflation-excluded nominal GDP, which bears more directly on tax revenues.

The new nominal growth estimate is for a 3.4 per cent increase this year, down from the 4.6 per cent advance forecast in the budget, and for a 4.0 per cent gain in 2013, down from the previously expected 4.4. Subsequent years were adjusted moderately upwards.

Using the new estimates, the TD Bank calculates revenues would be about $1.8 billion lower than projected this fiscal year, which ends March 31.

That may lead to a modest short-term hit on Ottawa’s bottom line.

Given what the minister has described as an uncertain and risky global outlook, Flaherty may also build in a bigger margin for risk on his deficit projections, which could delay — on paper at least — the government’s timeline for eliminating the deficit.

In the budget, Flaherty had pencilled a $21.1-billion shortfall this fiscal year, followed by deficits of $10.2 billion and $1.3 billion in the subsequent two years. The 2015-16 fiscal year would see a surplus for the first time in almost a decade.

Flaherty has said recently he still expects to meet his target for balancing the budget in the medium term, but was not specific about whether that would occur in the 2015-16 budget.