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Economic Viewpoint

Federal Budget 2024 Preview: At Risk of Losing Its Anchors, Federal Fiscal Credibility May Soon Be Set Adrift

March 14, 2024
Randall Bartlett
Senior Director of Canadian Economics

Spring is in the air, and with it the promise of warmer weather and government budgets. But a lot has changed since the Government of Canada tabled its prior fiscal plan in November 2023.

The federal government is tracking a larger deficit in the 2023–24 fiscal year than was projected in the FES 2023. In particular, the outsized pace of spending is highly concentrated in Direct Program Expenses (DPE)—the expenditure category where the federal government hoped to find the greatest savings and over which it has the most direct influence.

The resulting higher path of DPE over the forecast should more than offset the benefit from our improved economic outlook, leading to larger deficits. Add to that the announcement of a new national pharmacare program and a possible increase in military spending, and suddenly the “fiscal anchors” announced in the FES 2023 look much harder to achieve.

Despite this, the Government of Canada is in an enviable fiscal position internationally. That’s because it’s had the good fortune of standing on the shoulders of fiscal giants that came before. But it can’t take that for granted. The federal government would be wise to fund any new measures from existing planned spending while looking for opportunities to generate permanent savings. At the same time, focus should be shifted to reducing barriers to business investment, thereby better supporting gains in productivity and the living standards of Canadians.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.