Worsening Deficit and Debt Projections Put Canadian Liberals’ Spending Promises at Risk, Housing and Prescription Drugs Concerns Unaddressed, Canada

Finance Minister Chrystia Freeland’s fall update is expected to reveal deteriorating projections for Canada’s federal debt and deficits, leaving the Liberal government with limited fiscal flexibility to fulfill its spending commitments. Parliamentary Budget Officer Yves Giroux anticipates a lower economic forecast for the remainder of 2023 and 2024 compared to the March report, citing new spending measures and higher interest rates as contributors to the growing federal deficit. The recent surge in long-term interest rates further exacerbates the challenges faced by the government. The timing of the fall update coincides with rising public concern over housing affordability. Economic and fiscal updates serve as an opportunity for the Liberal government to reshape its economic plans amidst these concerns, but meeting spending commitments may be challenging given the weakened fiscal outlook. Experts warn of larger annual budget deficits and emphasize the need for a cautious approach to budgeting as the fiscal outlook continues to weaken. The government will need to strike a balance between fiscal responsibility and addressing public concerns in the coming months.