Report

Economic and Fiscal Outlook – October 2023

Oct 13, 2023

This report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.

Supplementary Data (xlsx)
Accessible version of appendices
Supplementary Data (xlsx)

Highlights

Following the contraction in real GDP in the second quarter, PBO projects the Canadian economy to stagnate in the second half of 2023. As the Bank of Canada maintains its restrictive monetary policy to restore price stability, we project that consumer spending will remain weak in the second half of this year and the first half of 2024.
PBO expects the Bank of Canada to hold the policy interest rate at 5 per cent through the first quarter of 2024. With CPI inflation on track to return to its 2 per cent target, we then expect the Bank to start lowering its policy rate in April 2024.
For the current fiscal year, 2023-24, PBO projects the budgetary deficit to rise to $46.5 billion (1.6 per cent of GDP). Assuming no new measures are introduced, and existing temporary measures sunset as scheduled, the budgetary deficit is projected to resume its downward trajectory, falling to $8.2 billion (0.2 per cent of GDP) in 2028-29.
PBO projects the federal debt-to-GDP ratio to rise to 42.6 per cent in 2023 24. Assuming no new measures and existing temporary measures sunset as scheduled, the federal debt ratio is projected to fall to 37.8 per cent in 2028-29 but remain above its pre-pandemic level of 31.2 per cent of GDP in 2019-20.
PBO projects the debt service ratio (that is, public debt charges relative to tax revenues) under status quo policy will peak at 12.0 per cent in 2023-24 and then decline gradually to 11.0 per cent in 2028-29—well above its pre-pandemic low of 8.3 per cent in 2018-19.