Canada’s economic growth likely to stall in Q2 as trade war bites: PBO

The parliamentary budget officer expects economic growth to stall in the second quarter of the year as Canada's trade war with the United States sinks exports.

The parliamentary budget officer said Thursday he expects the federal government’s deficit will balloon this year thanks to ramped-up defence spending — but without a spring budget or more clarity from Ottawa, he can’t say for sure.

Yves Giroux, the government’s fiscal watchdog, issued a new economic and fiscal update Thursday that omits the usual deficit projections for future years.

Giroux said in an interview Thursday that the lack of a spring budget leaves him unable to offer a concrete analysis to Parliamentarians about the sustainability of the government’s finances.

“Being the parliamentary budget officer, not having a budget is a big gap,” he said.

Giroux said his office could use the Liberals’ costed spring election platform as a basis for its analysis, but those plans have already shifted just a few weeks into the new government’s tenure.

Prime Minister Mark Carney announced plans earlier this month to reach the NATO defence spending target of two per cent of GDP this fiscal year with $9.3 billion in new funding — a rapid expansion of his own previous promise to hit those levels by the end of the decade.

The prime minister also promised $4.3 billion in aid for Ukraine at the G7 summit earlier this week.

In pre-election estimates that did not account for the impacts of the trade war, the PBO predicted the federal deficit would come in at $42 billion for this fiscal year. Based on new spending announced since then, Giroux said he now pegs that figure at between $60 billion and $70 billion.