The Honourable Jim Flaherty, Canada's Minister of Finance,
delivered the annual Fall Economic Update, or more formally; the
Update of Economic and Fiscal Projections, to a business luncheon
in Fredericton, New Brunswick on November 13, 2012. The Minister
used this opportunity to highlight the fact that though Canada
continues to be on track for modest economic growth and a balanced
budget in the medium term, the Canadian economy is not immune to
outside global forces. These forces, coupled with elevated levels
of household debt domestically, have prompted the Government of
Canada to revise its previous fiscal projections.
Compared with most advanced economies, Canada is in a
relatively strong position. For example, Canada's performance
on job creation over the economic recovery period has been the best
in the Group of Seven (G7). Additionally, Canada has recovered
economic output to levels prior to the global recession.
Canada is not immune to risks coming from outside its borders.
Specifically, these are the sovereign debt and banking crisis in
the euro area, a relatively modest economic recovery in the United
States, and the socalled American "fiscal cliff," or
fiscal contractions which could take place as of next year should
legislated expenditure reductions and tax increases come into
effect in the United States.
Domestically, the biggest risk to the Canadian economy
continues to be elevated levels of household debt.
The federal deficit will increase by $5 billion this year,
higher than the previous March forecast, to a total of $26.2
As a result of falling revenues, falling commodity prices,
global economic uncertainty, and moderate economic growth, the
government does not project a balanced budget until 2016/2017, a
year later than had been previously predicted. A balanced budget
may be possible sooner should anticipated fiscal risks not
materialize, as projections include a $3 billion margin of error or
While Canada has the best debttoGDP ratio amongst the G7
countries, Minister Flaherty emphasized that Canada is not immune
to a shaky global economy and is especially vulnerable to low
commodity prices, including the oil from which Canada generates
Minister Flaherty projects that nominal GDP, the broadest
measure of the government's tax base, for 2012 to 2016 will be
on average $25 billion, or 1.3 per cent, lower than he had
estimated in last March's budget, a substantial drop. However,
he said the average outlook for economic growth of 2.3 per cent
over five years is unchanged since Budget 2012.
During the question and answer period, the Minister stated that
the Government of Canada has contingency plans ready should the
European debt crisis "unravel in a disorderly way," as
well as in the event of a U.S. "fiscal -cliff."
Though some previous Fall Economic Updates have been used as
"minibudgets," the Government has returned to their
traditional function of updating the public on federal revenue and
spending projections post March budget period. This is the fourth
year Minister Flaherty delivered such an update in a location
outside the House of Commons.
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