Deficit may top forecast: Flaherty

Thursday, 30 September 2010 23:39 - - {{hitsCtrl.values.hits}}

OTTAWA (Reuters) - The deficit for the 2009-10 fiscal year may end up topping the government’s C$53.8 billion ($52.2 billion) forecast, Finance Minister Jim Flaherty said.

“It may be slightly higher than that, yes,” Flaherty told reporters when asked if the budget shortfall for the fiscal year that ended in March would be bigger than estimated.

“It may, because of some accounting issues that we have. And we’ve had discussions with the auditor general about that. But it will be north of C$50 billion,” Flaherty told reporters in Ottawa.

“On HST (harmonized sales tax payments) to the provinces, we may have to account for that fully in one year. If we do, it will bump the number up.”

Canada slipped into a budget deficit during the recession after a decade of surpluses, but aims to balance the books by 2015 in the hope of safeguarding its reputation as the most fiscally healthy country among the Group of Seven advanced economies.

Preliminary figures released earlier this year showed a C$47 billion deficit for last year, but final numbers will not be out until next month and could be substantially different.

Flaherty also said gross domestic product data for July, due out on Thursday, may be “a bit negative” but blamed tax changes for what he said would be a temporary blip.

“In July a lot of things happened like the introduction of the HST in two of the largest provinces and a 2 percent increase in the sales tax in the province of Nova Scotia,” he said. “Overall, we’re on track for the year.”

Statistics Canada will release the July GDP number at 8:30 a.m. (1230 GMT) on Thursday. Markets expect the economy to have contracted by 0.1 percent, which would be the first decline in nearly a year.

As the economic outlook remains uncertain, Flaherty hinted the government might be flexible with its plans to end a two-year freeze on employment insurance premiums.

The freeze is due to end at the start of 2011 and opposition politicians have pounced on the minority Conservative government for wanting to introduce what they say is an effective tax hike.

“We’re going to continue reviewing the subject. I’ve had discussions with some of the major participants in the economy and I’d say stay tuned on that. We’ll have more to say.”

Pic cap: