Canada: Budget 2022

As goes the economy goes the federal balance, and there has been good news on both accounts. Higher-than-expected real GDP, employment, and inflation since December 2021 have led to a meaningful improvement not just in the deficit now but over the entire federal fiscal outlook through the 2026–2027 fiscal year (graph 1). A much higher outlook for revenues can be thanked for this, while less spending than was floated in the run up to Budget 2022 also made a helpful contribution. This adds up to a faster pace in the decline of the debt-to-GDP ratio than previously expected, which should appease most of the fiscal hawks out there for now.