Morneau committed to deficit reduction despite slower economy

LONDON, Ont.—Finance Minister Bill Morneau concedes that Canada’s red-hot economy is likely to slow this year.

And he says that makes it all the more important for the federal government to continue making investments that will boost economic growth and job creation.

But Morneau says the government also recognizes the importance of being fiscally responsible and remains committed to reducing annual deficits over the long term.

In his fall economic update, Morneau projected a deficit of $19.9 billion in the 2017-18 fiscal year—almost $9 billion less than predicted in his budget last spring.

He also projected that the deficit would drop over the next five years, to $12.5 billion in 2022-23.

This year’s deficit projection includes $1.5 billion for “risk adjustment”—a figure that might be increased going forward to account for additional risks to the economy, such as the potential demise of the North American Free Trade Agreement.

“We’re continuing to work on our budget 2018 and one of the things we will consider is the appropriate consideration of risk, as we’ve done in previous times,” Morneau said Friday on his way into a cabinet retreat.

Morneau credited the Liberal government’s economic agenda for the economy’s super-charged performance over the last year

“The economy has performed exceptionally well in 2017,” he said. “The kinds of things we’ve done to help Canadian families has a had a real difference on our economy.”

However, he acknowledged economic growth will be “more modest” this year.

“We’re always facing challenges. We face long-term demographic challenges, we face global risks that might impact global growth. So we need to be focused on how we can continue to encourage growth in our economy.”

An internal Finance memo obtained by the CBC through access-to-information legislation, predicted annual economic growth of just 1.7 per cent over the next five years—a sharp decline from the 3.7 per cent growth rate of the last year.