Article 1:
Ottawa to remain in deficit until 2016: Dale Orr
OTTAWA -- A leading Bay Street economist said Wednesday that Ottawa is on track to post a $15-billion deficit next year – due to a deep contraction this year in the economy -- before incorporating any fiscal stimuli to be introduced in next Tuesday's federal budget.
That deficit will likely balloon to at least $30-billion once the Finance Minister unveils a three-pronged, multiyear stimulus package that will focus on infrastructure, tax cuts and job training, said Dale Orr, managing director of IHS Global Insight.
Ottawa would remain in a deficit position until the 2015-16 fiscal year, Mr. Orr added in his 13-page report.
Meanwhile, Parliament's budget watchdog also released a prebudget briefing, which more or less backed Mr. Orr's finding. "The near-term outlook for the Canadian economy has weakened further and is projected to remain below its potential capacity over 2008-2013," said Kevin Page, head of the Office of the Parliamentary Budget Officer.
"Before accounting for any new fiscal measures to be introduced in budget 2009, this more sluggish economic outlook suggests a further deterioration in the budget balance."
Further, Mr. Page said the risks to its outlook are tilted to the downside.
In his updated forecast, Mr. Orr said the Canadian economy would contract 1.5% this year, before taking into account any stimuli aimed at juicing the economy. Previously, IHS Global Insight had believed Canada would record meagre growth of 0.3% this year.
Mr. Orr said he expected the economy would not post positive growth until late 2009, and not reach full capacity until 2013.
This week, the Bank of Canada said it believes GDP will drop 1.2% this year.
Mr. Orr, who has taken part of prebudget consultations organized by the Finance Minister, Jim Flaherty, said he is assuming a fiscal stimulus package of $15-billion annually over the next two years. Of that amount, $4-billion is expected to be in the form of "permanent" measures, such as tax relief for individuals and businesses.
Mr. Orr said the stimulus package, while needed, would have had a more positive economic impact had it been tabled earlier, such as in the fall fiscal update. At best, the stimulus would boost, at most, economic growth by 0.5%.
"This fiscal stimulus plan increases economic growth slightly in 2009, a bit more in 2010," Mr. Orr said. "The fiscal stimulus package of budget 2009 is expected to contribute to our economic performance in a helpful -- if not somewhat tardy and perhaps costly manner."
In addition, Mr. Orr said some of the costs of the stimulus package could be recorded in the current fiscal year. Should that happen, that all but ensures Ottawa would incur a deficit for the 12-month period ended March 31. Department of Finance data indicate the government is running a small surplus of $200-million for the first seven months of the 2008-09 fiscal year, down from the $6.1-billion surplus reported in the same period of 2007-08, based on dwindling revenue.
Article 2:
Massive stimulus spending to have modest impact on economy: report
By THE CANADIAN PRESS
2009-01-21 12:04:00
OTTAWA - Forecasting firm IHS-Global Insight says not even multibillion-dollar government stimulus will keep Canada out of a prolonged recession, followed by several years of weak growth.
The private-sector forecaster says the economy will shrink by $40 billion this year, as a result of falling productivity and lower commodity prices.
IHS-Global Insight expects Finance Minister Jim Flaherty to pump up infrastructure spending by $5 billion to $10 billion this year, and cut taxes by $15 billion to $20 billion in each of the next two years.
But it says that would only boost the national gross domestic product by half a per cent at most, starting in late 2009.
IHS-Global predicts Canada's GDP will fall 1.5 per cent this year.
The firm expects the government will start off in the hole to the tune of an astounding $15 billion in the upcoming budget.