Canada posts its first budget surplus since global economic downturn
Ottawa - AFP
Canada posted its first budget surplus since the global economic downturn on Tuesday, lifting the re-election hopes of Prime Minister Stephen Harper's Tories in six months.
Despite the recent oil price plunge's drag on the government revenues of this major energy exporting nation, Ottawa projected a Can$1.4 billion (US$1.1 billion) surplus in fiscal 2015-2016.
That was up from a record deficit of Can$55.6 billion at the height of the Great Recession in fiscal 2008-2009.
And, according to the government, the surplus is expected to grow in each subsequent year.
"Geopolitical uncertainty continues to hobble the recovery," Finance Minister Joe Oliver said in a speech to parliament.
"And, of course, the dramatic plunge in oil prices has taken its toll on our economy.
"Still the news for Canada is, by and large, good," he said.
After coming to power in 2006, the Conservatives posted two back-to-back surpluses before the global recession hit and Ottawa racked up a record deficit in a bid to stimulate the economy.
Economic growth has been weaker than hoped, slowing to zero in the first quarter of 2015.
But it is expected to strengthen to 1.9 percent in the coming months, 2.5 percent in 2016 and 2.0 percent the following year.
In his budget speech, Oliver touted several tax measures largely benefiting families with children, seniors and small businesses.
He pledged to boost funding for Canada's military and security agencies, amid heightened fears of another terror attack in the wake of a gunman's storming of parliament in October.
But most of the new initiatives -- including reducing the small business tax to nine percent, faster corporate writeoffs of machinery and equipment, and Can$1 billion for public transit construction -- are backloaded, with monies only flowing after 2017.
In order to follow through on these promises, the Conservatives would have to win the October 19 election.
- Surplus revised downward -
The surplus is billions less than had been forecast in last year's budget, but only slightly less upbeat than Oliver predicted in a November economic update.
At that time, the finance minister said he expected to announce a deficit of Can$2.9 billion last year, followed by a Can$1.9 billion surplus in 2015-2016.
Government revenues are now forecast to increase this fiscal year to Can$290.3 billion, while expenses rise to $288.9 billion.
The government's coffers would have been fuller if oil prices had not fallen from a peak of US$108 on June 20, 2014 to the current US$45 to US$55 range.
But, according to Oliver, this new oil low actually provides some stability in government fiscal planning, as prices and royalties are likely only to rise.
To offset the immediate shortfall, Oliver sold off shares in General Motors, raided an unemployment fund and lowered a contingency fund in case of natural disaster, war or other national crisis from Can$3 billion to Can$1 billion.
Canada's debt, topping Can$600 billion, still remains among the lowest of any G20 country.
The federal debt-to-GDP ratio, meanwhile, is expected to fall to 30.8 percent this year but only reach a pre-recession low two years later.