Canada’s federal deficit could be much higher than Justin Trudeau’s government projected, according to a new report from Toronto Dominion Bank.
TD Bank says it could be as high as $34 billion, roughly $5 billion higher than the Liberal government budgeted for in March, thanks to weak economic growth.
“Recall that the government built in a $6-billion annual cushion into its numbers to protect against unforeseen events,” read the report, released Thursday. “This allotted cushion is poised to be absorbed, and then some.”
READ MORE: 5 years of budget deficit (Infographic)
Weak exports and the Alberta wildfires hammered the Canadian economy this year, resulting in the worst quarterly performance since 2009, following the global financial crisis.
In August, Statistics Canada said real gross domestic product fell at an annualized rate of 1.6 per cent during the second quarter. But real GDP rose 0.6 per cent in June – better than the 0.4 per cent expected by economists – as production in the oilsands started to resume.
The report noted that deficits will also be larger over the next five years, which means the government will take on an additional $16.5 billion in debt that it didn’t budget for.
READ MORE: Liberal government projects $29.4B deficit
However, TD notes that despite the widening of forecasted deficits, the country’s debt as a share of GDP is expected to remain effectively stable.
“Canada is thus likely to remain in an enviable fiscal position, relative to its advanced economy peers. This position should not be taken for granted, however,” read the report.
“We would caution against implementing additional measures that would drive the deficit profile significantly above the status-quo.”
In February, Trudeau backed away from campaign vows to balance the public books before the end of his government’s four-year mandate and cap the deficit at $10 billion. Those promises were central to the Liberal election platform.
When the Liberals unveiled the federal budget in March, they projected a $29.4-billion deficit in 2016-17, followed by a $29-billion shortfall the following year and almost $23 billion in 2018-19.
The Liberals claimed their budget will create 100,000 jobs and boost national economic growth, as measured by gross domestic product, by half a percentage point per year – a huge increase on a $2-trillion economy.
— With files from The Canadian Press