Canada Posts Narrower Budget Deficit Than Forecast

09/19/17 10:31 AM EDT
By Paul Vieira 

OTTAWA -- Canada posted a narrower budget deficit than previously forecast in the most recent fiscal year, reflecting the strong recovery in economic growth after a commodity-price swoon.

The Finance Department said Tuesday that the deficit for the 2016-17 fiscal year ended March 31 came in at 17.8 billion Canadian dollars ($14.5 billion), or 0.9% of gross domestic product.

In the 2017 budget plan, the Canadian government anticipated a C$23 billion budget shortfall for the fiscal year ended March 31, or 1.1% of GDP.

In the 2015-16 fiscal year, Canada posted a C$987 million deficit.

The smaller-than-forecast deficit was due to an improvement in the growth of nominal GDP, or the broadest measure of taxable income from which the government derives tax revenue. Canadian nominal GDP grew 2.1% in 2016, versus a meager 0.2% rise in the previous year, the Finance Department said, reflecting the income shock from lower commodity prices.

The results for fiscal 2016-17 reflect "the waning impact of the oil price shock on Canada's terms of trade, and higher [economic] growth," the Finance Department said in its annual report.

For the one-year period ended June 30, Canada's real gross domestic product rose 3.7%, marking the best 12-month run in over a decade. The Bank of Canada has raised interest rates twice in recent months due to the strong activity.

Over all, revenue fell 0.7% in the 2016-17 fiscal year from the previous 12-month period, to C$293.50 billion, while outlays related to government programs rose 6% to C$287.16 billion. Offsetting the rise in spending on government programs was a 5.2% drop in public-debt charges, to C$24.11 Billion which reflects low interest rates.

The Liberal government, led by Prime Minister Justin Trudeau, came to power in late 2015 on a platform to boost government spending on infrastructure and deliver tax cuts to middle-income earners in an effort to stimulate growth. .

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(END) Dow Jones Newswires

September 19, 2017 10:31 ET (14:31 GMT)

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