Special Report: Economic and Fiscal Outlook Statistics

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


Average
2008 2009 2010 2011ñ13

(per cent, unless otherwise indicated)
Real GDP growth
February 2008 budget 1.7 2.4 2.9 2.6
November 2008 Economic and Fiscal Statement 0.6 0.3 2.6 2.9
GDP inflation
February 2008 budget 1.8 1.9 1.8 1.6
November 2008 Economic and Fiscal Statement 3.8 0.5 1.8 2.2
Nominal GDP growth
February 2008 budget 3.5 4.3 4.7 4.2
November 2008 Economic and Fiscal Statement 4.4 0.8 4.4 5.1
Nominal GDP level (billions of dollars)
February 2008 budget1 1,590 1,659 1,738 1,890
November 2008 Economic and Fiscal Statement 1,603 1,615 1,687 1,870
3-month treasury bill rate
February 2008 budget 3.2 3.8 4.5 4.5
November 2008 Economic and Fiscal Statement 2.4 1.9 2.7 4.2
10-year government bond rate
February 2008 budget 3.6 4.2 4.8 5.0
November 2008 Economic and Fiscal Statement 3.7 3.7 4.2 5.0
Consumer Price Index (CPI) inflation
February 2008 budget 1.5 1.9 2.0 2.1
November 2008 Economic and Fiscal Statement 2.6 1.7 1.9 2.1
Oil price level (US dollars per barrel)
February 2008 budget 82.1 79.8 82.3 77.5
November 2008 Economic and Fiscal Statement 102.5 72.0 79.0 91.1
Exchange rate (US cents/C$)
February 2008 budget 98.0 95.5 95.5 96.2
November 2008 Economic and Fiscal Statement 94.9 85.6 88.7 95.8
Unemployment rate
February 2008 budget 6.3 6.4 6.2 6.0
November 2008 Economic and Fiscal Statement 6.1 6.9 6.7 6.2
U.S. real GDP growth
February 2008 budget 1.5 2.4 3.0 2.7
November 2008 Economic and Fiscal Statement 1.4 -0.4 2.1 3.0

1 Nominal GDP levels have been adjusted to reflect 2008 revisions to Canada's National Income and Expenditure Accounts.
Source: Department of Finance survey of private sector forecasters.

Risks and Uncertainties

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:


Actual Projection


2007ñ
2008
2008ñ
2009
2009ñ
2010
2010ñ
2011
2011ñ
2012
2012ñ
2013
2013ñ
2014

(millions of dollars)
Tax revenues
Income tax
Personal income tax 113,063 118,685 121,460 127,365 135,445 143,290 151,330
Corporate income tax 40,628 34,080 33,090 35,390 35,750 36,765 38,950
Other income tax 5,693 5,815 5,525 6,015 6,220 6,510 6,860

Total income tax 159,384 158,580 160,070 168,770 177,410 186,560 197,145
Excise taxes/duties
Goods and services tax 29,920 26,840 27,640 29,060 30,485 31,895 33,465
Customs import duties 3,903 4,200 4,355 4,640 4,940 5,240 5,530
Other excise taxes/duties 10,384 10,770 10,520 10,230 10,095 10,285 10,225

Total excise taxes/duties 44,207 41,815 42,520 43,930 45,520 47,420 49,220
Total tax revenues 203,591 200,395 202,590 212,700 222,930 233,980 246,365
Employment Insurance
premium revenues
16,558 16,500 17,350 17,675 17,670 18,110 18,690
Other revenues 22,271 22,135 28,550 28,525 30,340 31,840 32,205
Total budgetary revenues 242,420 239,030 248,490 258,895 270,940 283,930 297,260
Per cent of GDP
Personal income tax 7.4 7.4 7.5 7.5 7.6 7.7 7.7
Corporate income tax 2.6 2.1 2.0 2.1 2.0 2.0 2.0
Goods and services tax 1.9 1.7 1.7 1.7 1.7 1.7 1.7

Total tax revenues 13.3 12.5 12.5 12.6 12.5 12.5 12.6
Employment Insurance
premium revenues
1.1 1.0 1.1 1.0 1.0 1.0 1.0
Other revenues 1.5 1.4 1.8 1.7 1.7 1.7 1.6

Total 15.8 14.9 15.4 15.3 15.2 15.2 15.2
Total absent Insured
Mortgage Purchase Program 15.8 14.9 15.2 15.2 15.1 15.0 15.0

Note: Totals may not add due to rounding.

The revised fiscal outlook confirms the disappearance of budgetary surpluses:

Summary of Changes in the Fiscal Outlook Since the February 2008 Budget


Actual Projection


2007ñ08 2008ñ09 2009ñ10

(billions of dollars)
February 2008 budget underlying surplus 10.2 2.3 1.3
Impact of economic and fiscal developments
Budgetary revenues
Personal income tax 0.5 0.3 -4.0
Corporate income tax -1.8 -2.8 -3.5
Other income tax -0.2 -0.1 -0.6
Goods and services tax -0.8 -0.7 -1.2
Other revenues 0.1 0.0 0.4

Total revenues -2.1 -3.2 -8.9
Program expenses1
Major transfers to persons 0.1 -0.4 -1.2
Major transfers to other levels of government2 -0.4 -0.1 -0.4
Direct program expenses 2.0 1.3 0.4

Total program expenses 1.7 0.9 -1.1
Public debt charges -0.2 0.2 2.8
Total economic and fiscal developments -0.6 -2.1 -7.2
Impact of actions in this Statement 0.6 6.0
Revised surplus 9.6 0.8 0.1

Note: Totals may not add due to rounding.
1 A positive number implies a decrease in spending and an improvement in the budgetary balance. A negative number implies an increase in spending and a deterioration in the budgetary balance.
2 Includes putting Equalization on a sustainable growth path.