Office of the Parliamentary Budget Officer
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Economic and Fiscal Outlook — March 2024

Lisa Barkova ; Robert Behrend ; Régine Cléophat ; Mark Creighton ; Matt Dong ; Rolande Kpekou Tossou ; Marianne Laurin ; Katarina Michalyshyn ; Nora Nahornick ; Ulysse Robert-Lacroix ; Tim Scholz ; Jason Stanton ; Zachary Vrhovsek
Published on March 5, 2024 PDF(opens a new window)

This report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.

PDF

Communications

Quotes

  • We expect restrictive monetary policy to restrain growth in consumer spending in the first half of the year and to dampen residential investment over the course of this year. As excess supply in the economy increases and commodity prices continue to weaken, we project that CPI inflation will return to its 2% target by the end of 2024.

  • Excluding potential measures that could be included in the upcoming Budget and assuming existing temporary measures sunset as scheduled, the deficit is projected to decrease to $40.8 billion in 2024-25 while the federal debt-to-GDP ratio edges higher to 42.5%. Under status quo policy, the deficit is projected to decline over the medium term, falling to $16.9 billion (0.5% of GDP) in 2028-29.

  • In terms of downside risks, we continue to judge that the most important risk is a larger-than-expected impact on the Canadian economy, including housing, from the Bank of Canada’s restrictive monetary policy, which would negatively affect the Canadian economy and federal finances. In terms of upside risks, we judge that the most important risk is higher-than-projected growth in exports if U.S. real GDP growth does not slow as quickly as anticipated.

Yves Giroux
Parliamentary Budget Officer

News Release

{"id":61,"created_at":"2024-03-04T12:51:34-05:00","updated_at":"2024-03-05T08:57:09-05:00","slug":"sluggish-economic-growth-and-larger-budget-deficits-ahead-says-pbo-le-dpb-annonce-une-faible-croissance-economique-et-de-plus-gros-deficits-budgetaires","title_en":"Sluggish economic growth and larger budget deficits ahead, says PBO","title_fr":"Le DPB annonce une faible croissance \u00e9conomique et de plus gros d\u00e9ficits budg\u00e9taires","body_en":"The Parliamentary Budget Officer (PBO) today released his Economic and Fiscal Outlook. The report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.\n\nPBO projects growth in the Canadian economy to remain sluggish through 2024, with quarterly real GDP growth hovering around 1% (at annual rates), and the unemployment rate to reach 5.9% in the second half of this year.\n\n\u201cWe expect restrictive monetary policy to restrain growth in consumer spending in the first half of the year and to dampen residential investment over the course of this year,\u201d says PBO Yves Giroux. \u201cAs excess supply in the economy increases and commodity prices continue to weaken, we project that CPI inflation will return to its 2% target by the end of 2024,\u201d adds Mr. Giroux.\n\nPBO projects annual real GDP growth in 2025 to rebound to 2.4% as consumer spending surges and the drag from inventory investment dissipates. Over 2026 to 2028, PBO projects real GDP growth to average 2.1%, which is higher than our estimated growth in potential output over the same period.\n\nThe PBO outlook includes new measures announced by the Government in its 2023 Fall Economic Statement and through February 1. For the current fiscal year, 2023-24, PBO projects the budgetary deficit to be $46.8 billion (1.6% of GDP) and the federal debt-to-GDP ratio to rise to 42.4% under status quo policy.\n\n\u201cExcluding potential measures that could be included in the upcoming Budget and assuming existing temporary measures sunset as scheduled, the deficit is projected to decrease to $40.8 billion in 2024-25 while the federal debt-to-GDP ratio edges higher to 42.5%. Under status quo policy, the deficit is projected to decline over the medium term, falling to $16.9 billion (0.5% of GDP) in 2028-29,\u201d says Yves Giroux, PBO.\n\nCompared to PBO\u2019s October outlook, projected budgetary deficits are $7.9 billion higher, on average, over 2023-24 to 2028-29. This increase is largely due to upward revisions to the status quo outlook for direct program expenses and major transfers to persons.\n\nThe PBO report highlights risks and uncertainty surrounding the outlook. Setting aside new measures that are likely to be announced in the Government\u2019s 2024 budget, the risks to the PBO baseline economic and fiscal projection are roughly balanced.\n\n\u201cIn terms of downside risks, we continue to judge that the most important risk is a larger-than-expected impact on the Canadian economy, including housing, from the Bank of Canada\u2019s restrictive monetary policy, which would negatively affect the Canadian economy and federal finances,\u201d adds Mr. Giroux. \u201cIn terms of upside risks, we judge that the most important risk is higher-than-projected growth in exports if U.S. real GDP growth does not slow as quickly as anticipated\u201c.","body_fr":"Le directeur parlementaire du budget (DPB) a publi\u00e9 aujourd\u2019hui ses perspectives \u00e9conomiques et financi\u00e8res. Ce rapport fournit des pr\u00e9visions de r\u00e9f\u00e9rence aux parlementaires pour les aider \u00e0 \u00e9valuer les r\u00e9sultats \u00e9conomiques et financiers des politiques en vigueur.\n\nSelon les pr\u00e9visions du DPB, le Canada conna\u00eetra une faible croissance \u00e9conomique en 2024 : la croissance trimestrielle du PIB r\u00e9el se situera \u00e0 environ 1 % (taux annuels), tandis que le taux de ch\u00f4mage atteindra 5,9 % au cours du deuxi\u00e8me semestre de l\u2019ann\u00e9e.\n\n\u00ab\u2009Nous nous attendons \u00e0 ce que la politique mon\u00e9taire restrictive limite la croissance des d\u00e9penses de consommation pendant le premier trimestre et \u00e0 ce qu\u2019elle freine l\u2019investissement r\u00e9sidentiel tout au long de l\u2019ann\u00e9e\u2009\u00bb, affirme le DPB, Yves Giroux. \u00ab\u2009\u00c0 mesure que l\u2019offre exc\u00e9dentaire au sein de l\u2019\u00e9conomie augmente et que les prix des produits de base continuent de diminuer, l\u2019inflation de l\u2019indice des prix \u00e0 la consommation devrait revenir \u00e0 sa cible de 2 % d\u2019ici la fin de 2024\u2009\u00bb, ajoute M. Giroux. \n\nD\u2019apr\u00e8s les pr\u00e9visions du DPB, la croissance annuelle du PIB r\u00e9el en 2025 atteindra 2,4 %, aid\u00e9e par la forte hausse des d\u00e9penses de consommation et la reprise des investissements dans les stocks. De 2026 \u00e0 2028, la croissance moyenne du PIB r\u00e9el devrait \u00eatre de 2,1 %, un taux sup\u00e9rieur \u00e0 la croissance projet\u00e9e de la production potentielle pour la m\u00eame p\u00e9riode.\n\nLes perspectives du DPB tiennent compte des nouvelles mesures annonc\u00e9es par le gouvernement dans son \u00e9nonc\u00e9 \u00e9conomique de l\u2019automne 2023 et jusqu\u2019au 1er f\u00e9vrier. Si les politiques actuelles sont maintenues, le DPB pr\u00e9voit que le d\u00e9ficit atteindra 46,8 milliards de dollars (1,6 % du PIB) en 2023-2024 et que le ratio dette f\u00e9d\u00e9rale-PIB s\u2019\u00e9tablira \u00e0 42,4 %.\n\n\u00ab\u2009En excluant les mesures qui pourraient \u00eatre incluses dans le Budget et en supposant que les mesures temporaires existantes prendront fin comme pr\u00e9vu, le d\u00e9ficit devrait descendre \u00e0 40,8 milliards de dollars en 2024-2025, tandis que le ratio dette f\u00e9d\u00e9rale-PIB augmentera \u00e0 42,5 %. Si les politiques actuelles sont maintenues, le d\u00e9ficit devrait diminuer \u00e0 moyen terme pour atteindre 16,9 milliards de dollars (0,5 % du PIB) en 2028-2029\u2009\u00bb, explique le DPB, Yves Giroux.\n\nPar rapport aux perspectives du DPB en octobre, les d\u00e9ficits budg\u00e9taires pr\u00e9vus sont sup\u00e9rieurs en moyenne de 7,9 milliards de dollars de 2023-2024 \u00e0 2028-2029. Cette augmentation s\u2019explique surtout par une r\u00e9vision \u00e0 la hausse des projections pour les d\u00e9penses de programme et des principaux transferts aux particuliers.\n\nDans son rapport, le DPB mentionne les risques et les incertitudes li\u00e9s \u00e0 ses perspectives. Si on fait abstraction des nouvelles mesures qui seront vraisemblablement annonc\u00e9es dans le budget de 2024, les risques qui p\u00e8sent sur ses pr\u00e9visions \u00e9conomiques et financi\u00e8res de r\u00e9f\u00e9rence sont \u00e0 peu pr\u00e8s \u00e9quilibr\u00e9s.\n\n\u00ab\u2009Nous estimons toujours que le plus important risque \u00e0 la baisse serait que la politique mon\u00e9taire restrictive de la Banque du Canada ait des incidences plus grandes que pr\u00e9vu sur l\u2019\u00e9conomie canadienne, notamment le logement, ce qui nuirait \u00e0 celle-ci ainsi qu\u2019aux finances f\u00e9d\u00e9rales\u2009\u00bb, ajoute M. Giroux. \u00ab Le plus important risque \u00e0 la hausse nous para\u00eet \u00eatre une augmentation plus \u00e9lev\u00e9e que pr\u00e9vu des exportations si la croissance du PIB r\u00e9el des \u00c9tats-Unis ne ralentit pas aussi rapidement que nous nous y attendons\u2009\u00bb.","release_date":"2024-03-05T09:00:00-05:00","is_published":"2024-03-05T08:57:09-05:00","internal_id":"COM-2324-061","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/blog\/news-releases--communiques-de-presse\/sluggish-economic-growth-and-larger-budget-deficits-ahead-says-pbo-le-dpb-annonce-une-faible-croissance-economique-et-de-plus-gros-deficits-budgetaires"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/blog\/news-releases--communiques-de-presse\/sluggish-economic-growth-and-larger-budget-deficits-ahead-says-pbo-le-dpb-annonce-une-faible-croissance-economique-et-de-plus-gros-deficits-budgetaires"}},"pivot":{"publication_id":789,"news_release_id":61}}