1. The Economic and Fiscal Outlook
13 November 2018

2. Outline PBO 2.0 Medium-term economic and fiscal outlook
Long-term fiscal sustainability

3. PBO 2.0 Parliament of Canada Act Independent Agent of Parliament
Budgetary Transparency
Electoral Platform Costing

4. PBO 2.0 Electoral Platform Costing
10-Year Economic and Fiscal Baseline
On request, individual measures costed
Published when announced

5. October 2018 Economic and Fiscal Outlook (EFO)

6. The starting point Percentage points
Sources: Statistics Canada and Parliamentary Budget Officer.

7. U.S. and Canadian tariffs
$ millions
Source: Statistics Canada.

8. Canadian economic outlook
Contributions to real GDP growth, percentage points
Projection
2017
2018
2019
2020
Consumption
1.9
1.3
1.0
0.9
Housing
0.2
-0.1
-0.5
0.1
Business investment
0.3
0.8
0.4
Government
0.6
Exports
1.1
1.7
Imports
-1.2
-1.4
-0.7
-0.6
Inventory investment
-0.4
0.0
Real GDP growth
3.0
2.1
1.8
1.5
Additional indicators, %
Potential GDP growth
1.6
Output gap
0.7
Sources: Statistics Canada and Parliamentary Budget Officer.

9. Household financial vulnerability
% of disposable income
% of disposable income
Sources: Statistics Canada and Parliamentary Budget Officer.

10. Housing sector adjustment
% change
% of GDP
Sources: Statistics Canada, Teranet/National Bank of Canada and Parliamentary Budget Officer.

11. Canada’s investment climate
Foreign direct investment in Canada, $ billions
Source: Statistics Canada.

12. Canadian and U.S. crude oil prices
US$ per barrel
US$ per barrel
Sources: CME Group and Parliamentary Budget Officer.

13. Uncertainty around GDP projection
Nominal GDP, $ billions
Sources: Statistics Canada and Parliamentary Budget Officer.

14. 2017-18 financial results $ billions Actual PBO April 2018 Difference
Revenues
Personal income taxes
153.6
150.9
2.8
Corporate income taxes
47.8
46.6
1.2
Non-resident income taxes
7.8
0.0
Excise taxes/duties
53.8
53.0
0.8
EI premium revenue
21.1
20.8
0.4
Other revenue
29.4
29.2
0.2
Total revenue
313.6
308.3
5.3
Program expenses
Major transfers to persons
93.8
94.2
-0.4
Major transfers to other levels of government
70.5
70.6
-0.1
Direct program expenses
146.4
138.4
8.0
Total program expenses
310.7
303.2
7.5
Public debt charges
21.9
23.9
-2.0
Total expenses
332.6
327.1
5.4
Budgetary balance
-19.0
-18.8
Sources: Finance Canada and Parliamentary Budget Officer.

15. Federal fiscal outlook
Actual
Projection
$ billions
Budgetary revenues
313.6
325.3
337.7
352.0
364.1
377.8
392.0
Program expenses
310.7
321.0
331.5
338.5
345.6
353.8
364.6
Public debt
charges
21.9
23.7
27.4
30.9
33.3
35.3
36.8
Total expenses
332.6
344.7
358.9
369.4
378.9
389.1
401.4
Budgetary balance
-19.0
-19.4
-21.3
-17.4
-14.8
-11.2
-9.4
Federal debt
671.3
690.6
711.9
729.2
744.1
755.3
764.7
% of GDP
14.6
14.5
14.7
14.4
14.3
14.1
13.9
13.7
1.0
1.1
1.2
1.3
1.4
15.5
15.4
15.2
15.1
15.0
-0.9
-0.7
-0.6
-0.4
31.3
30.7
30.3
29.9
29.3
28.7
Sources: Finance Canada and Parliamentary Budget Officer.

16. Uncertainty around federal deficit
$ billions
Sources: Finance Canada and Parliamentary Budget Officer.

17. Uncertainty around federal debt ratio
% of GDP
Sources: Finance Canada and Parliamentary Budget Officer.

18. September 2018 Fiscal Sustainability Report (FSR)

19. Fiscal sustainability
Fiscal sustainability means that government debt does not grow continuously as a share of the economy
PBO assesses fiscal sustainability using the fiscal gap, which is the difference between current fiscal policy and a policy that is sustainable over the long term, expressed as a percentage of GDP
The fiscal gap represents the immediate and permanent change in revenues, program spending or combination of both that is required to stabilize a government’s net debt-to-GDP ratio at its current level over the long term

20. Senior dependency ratio%
Sources: Statistics Canada and Parliamentary Budget Officer.

21. Provincial-territorial health spending
% of GDP
Sources: Statistics Canada, CIHI and Parliamentary Budget Officer.

22. Real GDP per capita Chained 2007 dollars
Sources: Statistics Canada and Parliamentary Budget Officer.

23. Government net debt relative to GDP
% of GDP
Sources: Statistics Canada and Parliamentary Budget Officer.

24. Net debt-to-GDP: PTLA governments
% of GDP
2017
2042
2067
2092
Subnational (consolidated)
25.7
35.9
66.7
108.6
Newfoundland and Labrador
31.6
76.0
228.7
518.3
Prince Edward Island
30.3
8.4
74.8
209.6
Nova Scotia
27.0
39.0
91.0
185.5
New Brunswick
33.6
115.1
261.5
496.2
Quebec
42.9
4.3
-62.3
-183.8
Ontario
33.7
43.0
76.9
127.5
Manitoba
37.2
104.9
246.2
449.8
Saskatchewan
10.6
19.4
55.2
110.9
Alberta
1.6
43.6
100.5
163.8
British Columbia
5.7
8.9
17.9
14.8
Territories
-0.8
300.4
763.2
1380.2
Sources: Statistics Canada and Parliamentary Budget Officer.

25. Fiscal gap estimates % of GDP
Sources: Statistics Canada and Parliamentary Budget Officer.

26. Contributions to PTLA fiscal gap
% of GDP
Sources: Statistics Canada and Parliamentary Budget Officer.

27. Key takeaways
Over the medium term, we expect growth to slow as the Canadian economy comes to rely less on consumer spending and housing, and more on business investment and exports.
We project federal budgetary deficits to persist through the medium term and federal debt-to-GDP to decline to 1½ percentage points below the Government’s official debt anchor in
From the perspective of the government sector as a whole, current fiscal policy in Canada is sustainable over the long term. However, this masks an unsustainable provincial-territorial fiscal situation.
With the exception of Quebec, the public finances of provinces and the territories are not sustainable under current policies.

28. Questions/comments?

29. Major federal transfers to persons
% of GDP
Sources: Finance Canada and Parliamentary Budget Officer.