On Friday November 20, 2015, Federal Finance Minister Bill Morneau released an Update of Economic and Fiscal Projections which placed an emphasis on providing a realistic, sustainable, prudent and transparent fiscal management approach. The 2015 update reassesses the forecasts presented earlier this year in Budget 2015, and effectively reduces the projected budgetary balance by about $6.0 billion per year, on average, resulting in deficits of $3.0 billion in 2015–16 and $3.9 billion in 2016–17, and improving to surpluses of $1.7 billion in 2019–20 and $6.6 billion in 2020–21.
The recent economic and fiscal projections cover national and global GDP activity as well as commodity prices and financial market development, and are detailed below:
Canadian Economy
• Following a significant drop in Canadian business investment, the first half of 2015 saw reduced economic activity with a 0.8% decline in real GDP in the first quarter and a 0.5% decline in the second quarter.
• The decline in economic activity in the first half of 2015 was concentrated in the energy sector, which experienced 17.8% and 12.8% reductions of business investment in the first and second quarters of 2015, respectively, resulting from a significant decline in crude oil prices in mid-2014.
• Additional factors that negatively impacted GDP output in 2015 include weak U.S. economic activity in the first quarter of 2015, reduced consumption and increased global economic uncertainty.
• Output in non-energy sectors maintained growth despite declining overall economic output with a 0.4% and 13.3% growth in real GDP and non-energy merchandise respectively.
• Manufacturing sales and export are expected to continue growing with strong demand from the US and a lower Canadian dollar.
• According to private sector economists, real GDP growth in Canada over the next four years is expected to average 1.9% per year. This represents a 0.2% reduction from the figures projected in Budget 2015.
Global economy
• In 2015, the pace of global economic activity was at its slowest since the global recession in 2009.
• While the U.S. experienced weaker than anticipated growth resulting from the effects of reduced oil prices on capital spending as well as severe winter weather, real GDP growth is expected to pick up by 0.3% in 2016 as compared to 2014.
• Following high financial market volatility during the summer of 2015, global equity markets have somewhat rebounded but continue to demonstrate instability.