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Federal budget

Federal Spring Economic Update 2026

Don’t Start Popping the Champagne Yet

April 28, 2026
Jimmy Jean, Vice-President, Chief Economist and Strategist • Randall Bartlett, Deputy Chief Economist

Highlights

  • As was widely telegraphed prior to the Spring Economic Update (SEU) 2026, the federal government’s fiscal performance wasn’t as bad as previously predicted. The 2025–26 fiscal year (FY26) deficit was still a substantial $66.9B, but came in lower than the $78.3B projected in Budget 2025 (graph 1).
  • But don’t start popping the champagne yet. A big part of the near-term improvement in the deficit was a better-than-expected economic performance, which is beyond the federal government’s control. It is also something that may not be repeated.
  • Despite this improved starting point and economic outlook, the deficit forecast going forward is essentially unchanged from Budget 2025. That’s partly because last year’s savings also stemmed from lapsed spending—money that didn’t get out the door—as opposed to prudent fiscal management. New measures were announced which filled that newfound fiscal room as well.
  • On the spending side, many of the big measures were announced well in advance of the SEU 2026. Key measures since Budget 2025 include the Canada Groceries and Essentials Benefit ($11.8B over six years); supporting workers in the skilled trades ($6.0B); $4.1B for empowering and healthy Indigenous communities; $2.0B for supporting Ukraine; $1.7B to work with the provinces and territories to improve the housing supply; additional measures to support workers ($1.3B); increasing student grants and loans ($1.1B); and $1.0B for environmental protection and conservation.
  • Turning to revenues, the most substantive of these measures is the temporary suspension of the federal fuel excise tax ($2.4B in FY27). This is followed closely by the revamped tax credit for electric vehicle purchases, at $2.3B over six years. Otherwise, the tax breaks were few and far between.
  • One of the major benefits of the upwardly revised nominal GDP outlook is that it reduced the size of future deficits as a share of GDP even if those deficits were largely unchanged from Budget 2025. The projected path for the federal debt-to-GDP ratio is also meaningfully lower, despite the path of the federal debt not changing all that much. This will help to keep Canada in a better fiscal position than many of its advanced economy peers, supporting a strong credit rating and comparatively lower debt services cost.
NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.