GDP Growth Lower, Affects Tax Base

Canada, along with Germany, will continue to enjoy the strongest growth on average in the G-7 over the 2011ñ12 period, however, despite this, private sector economists have revised down their outlook for real GDP growth in Canada since the 2011 budget, particularly for 2011 and 2012, as reported in this week's Updated Economic and Fiscal Projections.

Real GDP in Canada is now expected to grow by 2.2 percent in 2011 and 2.1 percent in 2012, down from expectations of 2.9 percent and 2.8 percent, respectively, in the 2011 budget. As a result, the projected level of nominal GDP,the broadest single measure of the tax base, is now significantly lower than the planning assumption presented in the budget.

As a result, the government has announced that it will reduce the maximum potential increase in Employment Insurance (EI) premium rates in 2012 from 10 cents to 5 cents and temporarily extend the enhancement to the Work-Sharing Program.