By Canadian Press

Budget officer projects considerably slower economy, declining federal deficit

Oct 13, 2022 | 8:12 AM

OTTAWA — The parliamentary budget officer is projecting the economy will slow considerably in the second half of 2022 and remain weak next year as the Bank of Canada continues to raise interest rates.

In his latest economic and fiscal outlook, budget watchdog Yves Giroux says he expects the Bank of Canada to raise its key interest rate to four per cent by the end of the year before slashing it in late 2023 as inflation slows. 

The outlook also estimates the federal deficit will decline to $25.8 billion, or 0.9 per cent of GDP, for the 2022-23 fiscal year. 

The deficit was $97 billion, or 3.9 per cent of GDP, during the prior fiscal year. 

Assuming no new measures are introduced and existing temporary measures expire as expected, the PBO estimates the deficit will decline further to $3.1 billion, or 0.1 per cent of GDP, by 2027-28. 

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The PBO is also projecting that by 2027-28, the federal debt-to-GDP ratio will decline from its peak in 2020-21, but still remain above pre-pandemic levels. 

This report by The Canadian Press was first published Oct. 13, 2022. 

The Canadian Press