OTTAWA — The National Bank says the country's fading economic prospects could put the federal government on track to run $90 billion in deficits over the Liberals' four-year mandate.
In a report, the bank predicts the public books will sink deeper into the red due to the combination of a weakened economy and Liberal promises of billions in fiscal stimulus.
Report author Warren Lovely says if the bank's downgraded growth profile comes to pass then Ottawa could lose $50 billion in revenue over the next four years.
National Bank Financial's Warren Lovely projects deficits in the $25-billion range in each of the next two fiscal years, assuming the Liberals' stimulus spending. (Chart: NBF)
The Liberals have pledged to run deficits in the coming years in order to spend $17.4 billion over its first mandate on infrastructure projects — which they predict will create jobs and generate economic growth.
Since coming to power, however, the Liberals have shied away from their election vow to keep annual deficits under $10 billion as the economy continues to falter amid falling commodity prices.
The Liberals have also promised to balance the budget in the fourth year of their mandate — a goal Lovely says will be difficult to accomplish without tax hikes or spending cuts.
In November, Finance Minister Bill Morneau said the Liberal government had "inherited" a gloomier fiscal situation from its Conservative predecessors, including a $3-billion deficit forecast for the current fiscal year.
"Repeated downgrades to the national growth outlook have nonetheless dealt a heavy blow to the federal budget balance," Lovely wrote in his report, published Wednesday.