1. 1 December 17, 2008 Economic and Fiscal Update

2. 2 Overview Review forecast in Economic and Fiscal Statement Changes since the Statement Implications for the Government ’ s Fiscal position

3. 3 November Economic Outlook

4. 4 Evolution of consensus forecasts since July 2008 Per cent Blue Chip Consensus Survey, Real GDP Growth Outlook for 2009 Date of Forecast

5. 5 Considerable uncertainty about economic forecast Source: Department of Finance Survey of Private Sector Forecasters. Per cent Forecast Distribution of Real GDP Growth in 2009 Per cent Forecast Distribution of Nominal GDP Growth in 2009 2009 Average = 0.3% 2009 Average = 0.8%

6. 6 Private sector surplus projections (incorporating November 3 Equalization announcement)

7. 7 Statement took action to strengthen fiscal and financial positions and launch discussion on forward agenda Measures in Statement –Protect structural fiscal position –Reinforce financial system stability Set out priorities for forward agenda and consultations in preparation for Budget 2009

8. 8 Statement took action to protect structural surplus

9. 9 Billions of dollars Budgetary Balance Range of economic views Private Sector - High Scenario Private Sector – Low Scenario Average

10. 10 Economic Developments Since Statement Weaker world economic outlook Weaker U.S. economic outlook Lower commodity prices

11. 11 Per cent World Real GDP Growth Outlook The financial crisis has sparked a global recession Note: World GDP data are calculated on a purchasing power parity basis. Sources: IMF, World Economic Outlook Update (November 2008); Japan Economic and Social Research Institute; Eurostat; National Bureau of Statistics of China.

12. 12 U.S. economy continues to weaken more than expected Per cent U.S. Growth Outlook for 2009

13. 13 Oil prices have dropped dramatically since July 2008 $US/bbl Weekly Crude Oil Prices July 11 Dec 12 Nov 14 Survey Lehman Brothers

14. 14 The U.S. recession began a year ago while private sector forecasters expect that Canada is just now entering a recession. January 2005 = 100 Index of Total Employment U.S. enters recessionCanada enters recession

15. 15 Updated Private sector outlook Note: The Department of Finance’s survey of private sector forecasters is more up to date than Blue Chip’s. Blue Chip closed their survey on December 3rd-4th, while the Department of Finance’s survey closed on December 12th.

16. 16 Implications for fiscal outlook (after Statement measures) Billions of dollars Budgetary Balance Private Sector - High Scenario Private Sector – Low Scenario Average