Parliamentary Budget Officer Yves Giroux released his updated forecast for this and the following two fiscal years.Spencer Colby/The Canadian Press
Parliamentary Budget Officer Yves Giroux is projecting the federal deficit for the fiscal year ending March 31 will be $50.1-billion, providing an updated forecast ahead of a likely spring election.
The PBO released its outlook Wednesday, a report that provides an independent assessment of economic and fiscal trends.
According to the report, the deficit for the current fiscal year will be $50.1-billion, followed by a $42-billion deficit in 2025-26 and a $31.8-billion deficit in 2026-27.
The PBO’s projections show relatively little change from what the federal government forecast in its December fall economic update. That update said this year’s deficit would be $48.3-billion, followed by deficits of $42.2-billion and $31-billion.
The fall update revealed that last year’s deficit was $61.9-billion, meaning the government missed its self-imposed target of keeping that year’s deficit at or below $40.1-billion.
The PBO’s update provides federal political parties with a baseline that can be used as they prepare to cost out their election platforms. Parliament is currently prorogued until March 24 to allow the Liberal Party time to select a new leader. The results of that leadership race will be announced Sunday.
Prime Minister Justin Trudeau said Tuesday that following the leadership race, he and the new leader will discuss the exact timing of when he will formally be replaced.
“It should happen reasonably quickly, but there’s a lot of things to do in a transition like this, particularly at this complicated time in the world,” he said.
The new leader could choose to call a federal election before March 24. The three main parties have previously said they intend to defeat the Liberal government at the earliest opportunity when parliamentary sittings resume, however that plan is less clear now in light of U.S. tariff policies and speculation that the House of Commons may need to pass emergency support measures.
NDP Leader Jagmeet Singh told reporters Tuesday that he would be willing to have the House of Commons sit for several weeks before an election in order to approve emergency measures.
“My priority is workers,” he said.
The PBO report acknowledges the challenges involved with presenting economic forecasts at a time when the future of Canada’s trading relationships is unclear. As a result, the PBO’s main forecasts do not include assumptions regarding U.S. tariffs or retaliatory measures from Canada and other countries.
“There is considerable uncertainty regarding breadth, depth and duration of a potential global trade conflict,” the report states. Absent U.S. tariffs, the PBO projects the Canadian economy will grow by 1.7 per cent in 2025.
The PBO’s projections are based on economic data and government announcements up to Feb. 14.
One section of the report provides an illustration of the potential impact of a situation in which the U.S. imposes permanent 25-per-cent tariffs on non-energy goods and a 10-per-cent tariff on Canadian energy; the U.S. follows through on its tariff plans for imports from Mexico and China, as well as new tariffs on steel and aluminum imports; Canada, Mexico and China retaliate and tariff revenue is recycled back into the economy via transfers to households and government spending.
The PBO’s modelling suggests that these policies would permanently reduce Canada’s real GDP by about 2 per cent over the medium-term relative to a scenario in which no tariffs are imposed.
“There is considerable uncertainty around the potential impacts of tariffs, particularly in the short term. The impact could also be higher or lower depending on the eventual severity of the trade actions and Canada’s response,” the report states.