Budget surpluses will disappear, real GDP growth will stagnate but then recover nicely by 2010 and both inflation and interest rates will drop in 2009 according to this economic update. The Canadian dollar is expected to recover to exceed its 2008 level as well, by 2011. In fact, the private sector forecasts, shown below are indicative of a full recovery in a couple of years, as per the chart below. That's significantly good news.
Average Private Sector Forecasts: November 27, 2008 Economic Statement, Canada
The government reports that since the February 26, 2008 Federal Budget, revised projects have reduced revenues and certain expenses. These figures provide an important glimpse at the fallout expected from the financial crisis.
Revenues are now projected to be $3.2 billion lower in 2008ñ09 and $8.9billion lower in 2009ñ10, citing the following reasons:
ìThe downward revisions reflect both the weaker-than-expected 2007ñ08 results and the weaker economic outlook. The downward revisions in 2008ñ09 are driven by revisions to the corporate income tax forecast. For 2009ñ10, all major revenue streams have been revised down, reflecting the weaker economic outlook.î
On the good news side, total program expenses are also expected to be lower in 2008ñ09 than projected in Budget 2008, largely as a result of lower-than-expected direct program expenses.
However, in 2009ñ10, program expenses are higher than projected as it is anticipated there will be increased Employment Insurance costsóindicating more job losses are to comeóand elderly benefits. Equalization costs to provinces will also be higher than projected in the budget.
Revenue Outlook as per the November 27, 2008 Economic Statement:
The revised fiscal outlook confirms the disappearance of budgetary surpluses:
Summary of Changes in the Fiscal Outlook Since the February 2008 Budget