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Economic Viewpoint

The federal government has some leeway in terms of budget deficits

January 21, 2016
François Dupuis, Vice-President and Chief Economist • Benoit P. Durocher, Senior Economist

According to the results for the public accounts, the Canadian government posted a $1.9B budget surplus in 2014‑2015, ending a six‑year run of deficits. However, deficits are expected to be back in upcoming years due to worsening economic conditions and the initiatives being planned by the new federal government. This Economic Viewpoint sets out some benchmarks for how big upcoming budget deficits can get without compromising the federal government’s financial health. There seems to be considerable financial leeway, as deficits could be between $10B and $20B a year, based on relatively prudent assumptions. Deficits could even be a little larger in the event that a slightly higher indebtedness ratio is tolerated.