The federal finance minister is standing by his government\u2019s projections after Ottawa\u2019s budgetary watchdog cast doubt on Ottawa\u2019s ability to hit a key fiscal anchor.<\/p>\n
Parliamentary Budget Officer Annette Ryan on Thursday released her office\u2019s first economic and fiscal update since she assumed the role in April.<\/p>\n
Ryan predicts annual deficits will average $4.6 billion higher than Ottawa projected in its spring economic update.<\/p>\n
The budget office expects the deficit for this fiscal year will edge down to $71.8 billion \u2014 about $6.5 billion higher than Ottawa\u2019s spring projection.<\/p>\n
Ryan argued in the report that annual deficits will be deeper than Ottawa expects, mainly because of lower income tax revenue and higher program expenses. Lower public debt charges are expected to offset those pressures somewhat.<\/p>\n
One of the Liberal government\u2019s fiscal anchors is maintaining a declining deficit-to-GDP ratio over the forecast horizon.<\/p>\n
The PBO\u2019s outlook does see the federal government\u2019s deficit-to-GDP ratio falling from 2.2% in the last fiscal year to 1.5% by 2030-31.<\/p>\n
But after \u201cstress testing\u201d that outlook based on historical shocks, the report estimates the odds of Ottawa showing a decline in the deficit-to-GDP ratio every year at less than 1%.<\/p>\n
The PBO intends to release projections tracking the federal government\u2019s other fiscal anchor \u2014 balancing the operating side of the budget in three years \u2014 in a separate report.<\/p>\n
The office projects that the debt-to-GDP ratio \u2014 a closely tracked metric for fiscal watchers and an anchor under the previous Liberal government \u2014 will rise over the five-year horizon. The office estimates the odds of this figure declining instead over that period at roughly 40%.<\/p>\n
Finance Minister Fran\u00e7ois-Philippe Champagne was set to appear at the parliamentary finance committee on Thursday morning, 15 minutes after the PBO report was released. He did not stop to answer questions on his way into or out of the meeting.<\/p>\n
Conservative MP Jasraj Singh Hallan called the PBO\u2019s report scathing during the committee hearing. He argued it \u201ctotally debunked\u201d the government\u2019s claims of fiscal sustainability.<\/p>\n
\u201cI stand by our projections,\u201d Champagne said in response.<\/p>\n
\u201cWhat Canadians have seen is that we have a declining deficit and I think Canadians understand that\u2019s important to restore fiscal discipline.\u201d<\/p>\n
Deficit projections in the spring economic update were smaller than those tabled in Budget 2025 last fall. The government\u2019s fiscal position improved largely due to stronger-than-expected economic performance at the end of last year.<\/p>\n
Champagne also pointed to fresh estimates this week from the Organization for Economic Co-operation and Development, the OECD, which call for Canada\u2019s economy to grow at the second-fastest pace in the G7 this year and next.<\/p>\n
The PBO\u2019s updated outlook for the economy, however, is weaker than the office\u2019s last forecast in September 2025.<\/p>\n
The office now sees real gross domestic product rising 1.1% this year and 1.6% next, slightly lower than the fall projections.<\/p>\n
The PBO\u2019s estimates for growth this year are slightly lower than the OECD\u2019s outlook but in line with forecasts from private sector economists used in the government\u2019s spring economic update.<\/p>\n
The budget office\u2019s outlook assumes all tariffs between Canada and the United States currently in place will remain over the horizon.<\/p>\n