Federal deficit expected to be far smaller than forecast: PBO

Canada’s budget watchdog says the federal deficit will likely come in well below Ottawa’s previous forecast, absent new spending.

The PBO said it expects further improvements for Ottawa’s books through its forecast horizon, with the deficit falling to $3.1 billion – or 0.1 per cent of gross domestic product – in fiscal 2027-28.

While that forecast would have the federal debt-to-GDP ratio, considered one of Ottawa’s fiscal anchors, falling from its 2020-21 peak of 47.5 per cent to 36.2 per cent, it would remain above pre-pandemic levels.

However, Parliamentary Budget Officer Yves Giroux said there are downside risks for the domestic economy and federal finances as rising rates hamper overall economic output.