TORONTO, Nov 5 (Reuters) – Prime Minister Mark Carney plans to use windfall oil revenue to boost Canada’s productivity and build infrastructure over the next five years while keeping his previous fiscal goals intact, his second budget showed on Thursday.
Here are some comments from economists:
RANDALL BARTLETT, DEPUTY CHIEF ECONOMIST, DESJARDINS
“The main takeaway is that I think there is a fair bit of creative accounting that had to happen to create enough fiscal room for the federal government to substantially increase spending and reduce revenues as well. It’s one of the more unusual budgets I’ve seen from that regard.”
“Once rating agencies start digging into this, I think we’ll get a clear view of the concerns and considerations that they are looking at when it comes to federal debt. We’re not expecting an imminent debt downgrade in Canada, but I think there’s sufficient manipulation of the numbers here under the hood that it does create some concern around the fiscal position of the federal government and whether it’s as healthy as they’ve implied it is from this document.”
The government holds its financial accounts to a high standard and it would be highly unusual for a G7 country to do any creative accounting, a Finance Ministry spokesperson said in response.
SHELLY KAUSHIK, SENIOR ECONOMIST, BMO CAPITAL MARKETS
“The deficit is very little changed despite the fact that economic growth came in more resilient than expected in the spring. So there was an opportunity there to have more fiscal room flow through to the deficit, but instead the government chose to spend most of it.”
“The profile looks good as a share of GDP, but that’s mostly because GDP performed better than expected.”
“The spending is still very much focused on bringing investment into the country — the Productivity Mega Deduction is certainly the measure with the highest price tag. So it’s still very much a pro-growth agenda; we’re just seeing another budget where the budget is taking most of its fiscal room and spending it.”
PEDRO ANTUNES, CHIEF ECONOMIST, SIGNAL49 RESEARCH
“Essentially, we’ve gotten a bit of a windfall because of largely oil, and commodity prices more broadly have lifted up nominal GDP, or nominal revenue stream for the government. That’s given them about C$158 billion over the planning horizon in additional revenue, essentially, or additional room to maneuver. A good third of it, maybe a little bit more than that, was aimed at essentially incenting private sector investment. I think in general that is aiming at the right problem that Canada has.”
(Reporting by Fergal Smith; Editing by Caroline Stauffer and Rod Nickel)
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