Canadian Government Posts $603M Deficit
December 23rd, 2008 at 5:48 pm - by admin
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Jim Flaherty, Canadian finance minister, backtracked on his previous “no deficit” statement earlier this session, and released a sobering statement about the financial state of the Canadian government, announcing a $603 million dollar deficit in October, Tuesday.
Canadian fiscal 2008 was marked with a small surplus in the first months (approximately $200 million, down from the $6 billion seen in 2007), and a repeated comment from the finance minister that the Conservative government refused to run a deficit, and would be increasing spending cuts to compensate for weakened economic conditions.
Additionally, unemployment rose by over 100,000 citizens representing a very up-and-down style of government employment insurance payments. Rising unemployment demonstrates reduced tax revenue and increase expenses in EI payments; furthermore, employment rates act as a good metric for the strength and security of an economy, and its economic growth.
Flaherty blames the $600 million deficit in October on decreasing tax revenues, not mismanagement or increased spending on government services, goods and services tax was seen to be down nearly 20% in this month year-to-year, while gross tax revenue was up approximately 3% from the year preceding.
“GST revenues were down $2 billion, or 11 per cent [month-to-month], reflecting the one-percentage-point reduction in the GST rate effective January 1, 2008,” announced Flaherty’s financial department.
Furthermore, transfer payments from the federal government to provincial governments increased about 6% year-to-year this October, an increase that represents a $17 billion dollar total transfer payments program.
Canadian bank, Toronto-Dominion Bank (TD Bank) analysts also made fairly depressing predictions about the Canadian economy, suggesting that GDP would be likely to fall nearly 2% in 2009 and making the at this point axiomatic claim that Ontario would be the hardest hit.
“We now expect the U.S. recession to be similar in magnitude to that of 1981-82 while a highly synchronized world economy experiences the deepest recession since the data began in 1960,” said TD economist, Pascal Gauthier, going on to confirm that even provincial economic superstars Alberta and Saskatchewan would see modest contractions in 2009.
