The federal government is set to plunge deep into deficit — predicting shortfalls of $64 billion over two years — as it dramatically boosts spending to revive Canada’s economy.
A senior government official, in advance of Tuesday’s budget, announced Thursday that pro-growth spending and tax measures in the budget will drive this year’s deficit to $34 billion.
That will be followed by a $30 billion shortfall in 2010-11, the official told the media yesterday, and Ottawa won’t see a budget surplus for at least five years.
Bank of Canada governor Mark Carney said the government’s plan will help Canada quickly leave the global recession behind.
In his latest forecast, Carney said the economy is currently in a severe recession but will begin to bounce back in the second half of this year — partly as a result of Ottawa’s economic stimulus strategy.
The deficit is “predominantly” the result of new spending initiatives to restore consumer confidence and keep Canadians working, said the official, who asked not to be named. But falling government revenues, blamed on sagging corporate and individual tax returns, also contribute to the deficit, he said.
“We are designing our action plan to ensure that these deficits are truly short term and not permanent,” the official added. “If your spending is short term in nature and programs are time limited, you can predict with much greater degree of certainty that you will not run (a permanent deficit.)”