Finance Minister Chrystia Freeland says she will table the 2023 federal budget on March 28.
The Canadian economy is expected to slow significantly this year and potentially enter a recession as high interest rates squeeze the budgets for individuals and businesses alike.
Freeland has stressed that the Liberal government is focused on fiscal restraint, so as to not work against the Bank of Canada’s efforts to tame inflation.
“One of my principal responsibilities is not to pour fuel on the flames of inflation,” Freeland said in a news conference on Wednesday in Mississauga, Ont.
“Fiscal responsibility is really important and I’m very conscious we’re putting this budget together at a time of meaningful fiscal constraint.”
The Bank of Canada has raised interest rates aggressively over the last year, bringing its key interest rate to 4.5 per cent, the highest it’s been since 2007.
Economists stress it’s important that fiscal policy doesn’t stimulate demand in the economy at a time when the central ban is trying to slow it down.
The Liberal government has also been facing mounting pressure to rein in spending after years of deficits that have increased the country’s pre-existing debt.
According to the parliamentary budget officer’s most recent forecasts, the federal deficit is expected to be $36.5 billion for the 2022-23 fiscal year.
That’s significantly lower than the 2021-22 deficit, which came in at $90.2 billion.
But with economic growth slowing, government revenues are at risk of taking a hit.
Assuming no new measures and the expiration of temporary measures, the PBO is forecasting the deficit to increase for the 2023-24 fiscal year before steadily declining.
The government’s 2022 fall economic statement indicated it plans to introduce more measures to support Canada’s green transition and stay competitive with the United States on clean technology.
“We really believe as a government that there is a historic window right now that is open for Canada to building the industrial Canadian economy of the 21st century,” Freeland said Wednesday.
Robert Asselin, senior vice-president of policy at the Business Council of Canada, said Canada needs to do better at a time of fierce global competition.
“It requires a targeted response and measures that will boost our productivity and ensure long-term economic growth,” Asselin said in a statement.
“This policy work will take more than one budget, but there is urgency to get going.”
Health-care spending is likely to be another key element in the budget, as the federal government has tabled 10-year deals with most provinces already.
—Nojoud Al Mallees, The Canadian Press
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