Liberals to Keep Low Debt Targets despite Weak Economic Growth

This article was last updated on April 16, 2022

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The federal government has reiterated its promises and maintained that it will reduce Canada’s debt as a share of the economy even though a fiscal update on Tuesday showed weaker short-term growth than Ottawa had anticipated. Finance Minister Bill Morneau hinted about the economic landscape on Friday as he prepared for the complete fiscal update to be presented on Tuesday.

In his March budget, Mr. Morneau showed a plan to spend more on infrastructure by running at least five consecutive years of deficits. However, the government argues that Ottawa has the fiscal room to run deficits while still lowering the federal debt as a percentage of Gross Domestic Product. According to the March federal budget, the federal debt was estimated as a percentage of GDP would decline from 32.5 per cent in 2016-17 to 30.9 per cent in 2020-21.

Addressing reporters on Friday, Mr. Morneau concluded in a speech to the Toronto Board of Trade that “what we’ve said is that we believe that being fiscally prudent is critically important,” adding that “so the idea that we will reduce our net debt-to-GDP remains our approach to fiscal management and that will be something that we will continue to communicate.” Mr. Morneau explained that “our fall fiscal update will give people a sense of where the economy is right now. It will give them a sense of what we see as our growth rate over time. It will also give them a sense of the way that we’re going to work to improve our situation. It will provide for them how we’re going to be fiscally responsible and that continues to be our goal. We’ve identified the net debt to GDP as a critical way to understand that and we’ll have more to talk about that next week and in the coming months.”