Fading economy could put Canada to $90 billion scarcity: study

By Staff Writer

Feb 11, 2016 07:44 PM EST

The present government of Canada is experiencing a series of scarcity in the budget, which could reach $90 billion over the mandate period of four years. The financial experts now predicts Canada's economic growth to be merely 1% or even less in the present year.

The government under Prime Minister Justin Trudeau is under pressure with an economy slapped by the collapse in oil market, THE GLOBE AND MAIL said citing a study report. The Liberal government is facing challenges from two sides, in the first place it has to work hard to elevate the fading economy, and secondly the government has to manage the books, while at the same time keeping up its election pledges.

According to Warren Lovely, head of public sector research at National Bank Financial, the fading economy combined with election vows of the Liberals created a budget scarcity of $90 billion over the mandate period. The budget deficit denotes a total erosion of $100 billion in the budget plan that was presented 10 months ago, Lovely added.

Warren Lovely also said that the Liberal government of Canada failed to keep deficits to $10 billion per year. Currently, the economy of Canada requires a strict financial policy that focuses on low spending and/or higher taxes in the coming years.

The struggling Liberal government needs to insert a minimum of C$50 billion into Canada's fading economy to assist the nation to sustain the fall in oil prices as well as to accelerate growth, Bloomberg said quoting financial expert David Rosenberg. Canada is one of the few nations, which has the scope to involve in economic incentives, Rosenberg added.

"It's got to be in smart infrastructure. There are areas of the economy in transportation infrastructure, communication, that could have tremendous multiplier impacts," Rosenberg said in an interview on Bloomberg TV. According to him, the nation should not depend merely on fiscal policy, but the fiscal response is the most needed aspect for the Canadian economy.

According to financial experts, by aiming debt-to-GDP, the government could generate annual scarcity of nearly $25 billion in the future years and can further lessen the ratio if the economy develops at a moderate pace, thestar.com reports. Warren Lovely estimates Canada's bottom line has decelerated by $15 billion for 2016 -2017, when compared to previous forecast in the budget that was presented during the Conservative government. This number has dropped nearly $9 billion from November, Lovely added.

The Canadian government need to relax its medium-term loan goal further to boost flexibility to provide robust monetary motivation package that the Canadian economy actually wants. The capital injection will rescue the nation's economy from the chain of budget deficits.

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