Federal government projects $18.4B deficit next year

The Department of Finance is anticipating a “significant deterioration” of the economy in 2016 and projecting a deficit of $18.4 billion next year.

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Finance Minister Bill Morneau announced Monday that the federal budget will be released on March 22. He said the government is now forecasting deficits of $18.4 billion in 2016-17 and $15.5 billion in 2017-18.

Those estimates don’t include the billions of dollars the Liberals have promised in infrastructure and stimulus spending. That means the shortfall could exceed $20 billion once the stimulus money starts flowing.

The economic downturn is also expected to wipe out more than $61 billion from the federal treasury.

“Our starting point is much further back than we thought,” Morneau told a town tall in Ottawa on Monday. Despite the downturn, the government’s economic plan is still a prudent one, he said.

The new projections are based on expectations that U.S. economic growth “may again disappoint” in 2016, and negatively affect Canadian exports, as well as incentives to expand the energy sector.

Because the global oil market is over-supplied, declining oil prices may not rebound as quickly as previously expected. In the meantime, the loonie is expected to hover around 72 cents U.S.

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