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Canada Strong, Deficits Long
Ottawa is projecting a $65.3 billion deficit (1.9% of GDP) for FY26/27 in the Spring Economic Update, little changed from the $65.4 billion forecast in the original budget plan (recall that was tabled in November). A broadly stronger revenue environment has helped, but that improvement was fully soaked up by new program announcements. The deficit for FY25/26 (the fiscal year that just ended in March) did come in better than expected at $66.9 billion, down from the $78.3 billion assumed in the fall. Deficits track very modestly lower through the forecast horizon,but remain well in the red at $56.2 billion by FY29/30. All in, the five-year cumulative improvement in the bottom line runs at $12.5 billion, confirming the better news that Ottawa was floating in recent days.
New measures announced since the fall budget come in at $15.7 billion this fiscal year, and average $8.2 billion per year over the following four years. Ottawa continues its trend of adding significant stimulus into an economy that has held up relatively well, especially given the headwinds of the trade shock.
All told, the headline-grabbing new measures announced recently, and in this document, have rolled more fiscal stimulus out onto the economy. They have also soaked up a better underlying fiscal position, leaving the deficit little changed for FY26/27 and beyond.