As a result of a weakening economy, the government's upcoming 2016-17 budget plan will show a deficit larger than the Liberals' promised $10-billion shortfall cap, Trudeau told Montreal's La Presse newspaper.
Just how big that deficit will be remains unclear.
Justin Trudeau shakes hands with supporters after his victory speech in October. (Photo: Justin Tang/CP)
If the economy continues to deteriorate, it will be difficult for the Liberals to live up to their pledge to balance the books in 2019-20, Trudeau said in an interview published Thursday.
Less than two months ago, Trudeau insisted that the Liberal plan to make good on that key balanced-budget promise was "very" cast in stone.
The doubts raised by Trudeau offer a glimpse of the fiscal pressure faced by the Finance Department as it crafts the government's first federal budget, expected late next month.
"If we look at the growth projections for the next three or four years, it will be difficult (to return to balance)," Trudeau was quoted by La Presse as saying.
"But everything we're doing is aimed at creating economic growth. When predicting the level of growth four years in advance, governments often miss the target."
"Yes, we will go over $10 billion."
Trudeau said the Liberal government still intends to fulfil its other, more flexible "fiscal anchor" — lowering the debt-to-GDP ratio in every year of its mandate.
By zeroing in on debt-to-GDP, economists say the Liberals could run annual deficits of up to $25 billion in the coming years and still push the ratio downwards, as long as the economy grows at a decent pace.
The Liberals have promised to run deficits in the coming years in order to be able to spend billions on projects like infrastructure, which they predict will create jobs and help revive the economy.
Along with infrastructure spending, the Liberals have also pointed to their other economy-boosting plans.
They include cutting taxes for middle-income earners — offset in part by raising taxes on the highest earners — and revamping child benefits so they help more families.
Those measures, however, will lower revenues destined for the public treasury over the coming years.
During the fall election campaign, Trudeau promised to keep deficits below the $10-billion mark in 2016-17 and 2017-18 unless the economic situation got radically worse.
"Yes, we will go over $10 billion," Trudeau told La Presse. "By how much? We are in the process of examining that."
In recent months, the Canadian economy has sputtered in large part due to the steep drop in commodity prices.
On Wednesday, a National Bank of Canada report said the country's fading economic prospects could put the Liberal government on track for $90 billion in deficits over its four-year mandate.
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