Report

Economic and Fiscal Outlook — March 2024

Mar 5, 2024

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

Supplementary Data (xlsx)

Highlights

The Parliamentary Budget Officer (PBO) projects growth in the Canadian economy to remain sluggish through 2024. Restrictive monetary policy is expected to restrain growth in consumer spending in the first half of the year and to dampen residential investment over the course of this year. Inventory investment is projected to subtract from growth as businesses pullback on their stock building.
As excess supply in the economy increases and commodity prices continue to weaken, PBO projects that Consumer price index (CPI) inflation will return to its 2 per cent target by the end of 2024. With CPI inflation on track to return to target later this year, we continue to expect the Bank of Canada to start lowering its policy rate in April.
PBO projects the budgetary deficit to rise to $46.8 billion (1.6 per cent of the Gross domestic product (GDP)) in 2023-24 from the $35.3 billion (1.3 per cent of GDP) deficit recorded in 2022‑23. Assuming no new measures are introduced, and existing temporary measures sunset as scheduled, the deficit is projected to resume its downward trajectory, falling to $16.9 billion (0.5 per cent of GDP) in 2028-29.
PBO projects the federal debt-to-GDP ratio to increase from its 2022-23 level of 41.7 per cent, reaching 42.4 per cent in 2023‑24 and 42.5 per cent in 2024‑25. Assuming no new measures and existing temporary measures sunset as scheduled, the federal debt ratio is projected to fall to 39.2 per cent in 2028‑29 but remain well 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 total revenues) to rise from 7.8 per cent in 2022‑23 to 10.2 per cent in 2023‑24. As the effective interest rate on debt edges higher in 2024‑25, we project the debt service ratio to increase further and average 10.7 per cent through 2028‑29—well above its pre-pandemic record low of 7.0 per cent in 2018-19.