Nation’s fiscal update points to promising growth during the next 5 years
Canada’s fall fiscal update was released and it shows promising growth for the country, despite the 25% drop in the price of oil since July of this year. The decline of crude oil prices due to lower demand and oversupply drove the Department of Finance total commodity index down 14%, according to the fiscal update.
Despite the economic uncertainty created by global markets and lower oil prices the Canadian economy continued to strengthen through the end of 2014. Canada has seen the largest growth in real GDP among G-7 countries since 2009 at 14%, and the second largest growth in employment after the U.S. at 7.3% since July of 2009.
Finance Minister Joe Oliver warned that falling oil prices will hurt federal revenues and impact the Canadian economy – but maintains the Conservative Party will still balance the books in 2015, reports the Financial Post. A prolonged period of low energy prices would erode federal tax revenue and hurt parts of the Canadian labor market, even though it will translate into lower prices at the pumps for motorists.
Some forecasters thought there would be a small surplus in the current fiscal year, but recently announced tax cuts for families, which cost $2.83 billion, led to an overall deficit of $2.56 billion for the current fiscal year. Despite the tax cut creating a deficit for the current fiscal year, the fiscal update reported that it expects a surplus of $1.9 billion in 2015-16, steadily growing to $13.1 billion in 2019-20.
The Canadian fall forecast also included a survey of private sector economists. Economists surveyed expect Canadian real GDP growth to average 2.5% over the second half of 2014, compared to 2.3% in the first half of the year, and then to pick up to 2.6% for 2015 as a whole.
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