Thursday, March 19, 2009

Ottawa to face bigger deficit: TD Bank

The recession is going to force the federal government much deeper into deficit than it forecast in its last budget, according to the Toronto-Dominion bank.

"The result is [an] all-time high deficit of $39.2 billion in fiscal 2009-10 and $42.3 billion in fiscal 2010-11," said Toronto-Dominion chief economist Don Drummond in a statement.

"[It's] well above the red ink of $33.7 billion and $29.8 billion shown in the budget. Still, as a share of GDP, the budget shortfalls will be considerably lower than the 5-8% levels recorded during the 1980s and early 1990s."

And that's going to drive Canada even deeper into debt; Drummond anticipates the national mortgage will increase to $540.2 billion in the 2010-11 fiscal year instead of $522.2 billion. He says Ottawa will be poorer than expected because of lower tax revenue and greater Employment Insurance payments.

However, he thinks the Canadian economy is better equipped to handle this recession than it was in the 1990s.

Drummond says the economy has grown significantly in the last 15 years and Ottawa is therefore better equipped to shoulder bigger shortfalls.