A new analysis of public finances by various governments in Canada indicates that revenues were higher than expected last year due to rising inflation and economic growth.
Desjardins Group’s analysis shows that spending is more mixed, but pandemic-related spending is generally lower than expected.
As a result, federal and provincial governments have seen improvements in their deficit estimates for 2021-2022, but Desjardins found that governments ’use of these tax windfalls varies greatly.
Some chose to set aside some of it for more difficult times, while others spent it all.
Desjardins expects economic activity to be weaker than most governments forecast for next year and beyond. This means that some of them may experience a more difficult budget situation than they expected.
With real gross domestic product (GDP) growth, inflation and labor market indicators exceeding expectations in early 2021, it is not surprising that revenues are very strong.indicates evaluation. Spending also fell short of expectations, albeit more modestly, especially in areas most closely related to the economy such as the measures associated with COVID-19.
Good news for budget shortfalls
Due to the favorable economic wind, budget deficits in the financial year 2021-22 are expected to be generally lower than the original projected period in the 2021 budget period.
Some provinces, such as Alberta, Quebec and New Brunswick, hope to accumulate operating surpluses. Others, such as Manitoba, Saskatchewan and Newfoundland and Labrador, may report smaller deficits in 2022-23 compared to the previous fiscal year. These deficits are divided between financing operating deficits and capital investments.
Finally, Ontario, British Columbia, Nova Scotia and Prince Edward Island all emit larger budget deficits as a percentage of GDP this year than in fiscal year 2021-22, which will result in an increase in net debt to GDPsaid Desjardins.
In terms of total public debt, Canada has a net debt-to-GDP the lowest in the G7, the review says. And while higher than before the pandemic, Canada’s overall public debt position continues to compare very well with other major advanced economies.
This idea was reinforced when Standard & Poor’s reaffirmed the Government of Canada’s AAA credit rating with a firm outlook at the end of April 2022.
Source: Radio-Canada
