Thank you, Mr. Chair.
Good afternoon, Mr. Chair, Mr. Vice-Chairs, and members of the committee.
Thank you for inviting us to appear before the committee to discuss our April 2018 economic and fiscal outlook. The parliamentary budget officer, or PBO, supports Parliament by providing economic and fiscal analysis to parliamentarians. Pursuant to section 79.01 of the Parliament of Canada Act, the parliamentary budget officer provides analysis “for the purposes of raising the quality of parliamentary debate and promoting greater budget transparency and accountability.” In addition, consistent with the legislated mandate of the parliamentary budget officer, our office provides economic and fiscal outlooks.
Since October there have been external and domestic policy developments that will impact the Canadian economy over the medium term. These include changes to fiscal policy in the United States, implementation of Canada's carbon pricing levy, as well as an expected fallout from ongoing NAFTA negotiations. We have incorporated into our April outlook assumptions with regard to the impact of these developments.
We project real GDP growth in Canada to average 1.7% annually over 2018 to 2022. Over the medium term, we expect the Canadian economy to rely less on consumer spending and the housing sector as business investment and exports make a greater contribution to economic growth.
Our economic outlook reflects the view that possible upside and downside outcomes are, broadly speaking, equally likely. In terms of downside risks, we now believe that the most important risk is weaker export performance. In terms of upside risks, we maintain that the most important risk is stronger household spending.
Compared with our October outlook, the projected level of nominal GDP, the broadest single measure of the tax base, is on balance unchanged, with upward revisions to GDP price levels offsetting downward revisions to real GDP.
On the fiscal side, revisions to our outlook for the Canadian economy have modest impacts on our medium-term projection of the budgetary balance. Incorporating our new projection of direct program expenses along with new year-to-date financial results contributes to reducing projected budgetary deficits on a status quo basis—that is, prior to policy actions since October 2017.
We estimate that policy actions taken since the government's 2017 fall economic statement amount to $22 billion over 2017-18 to 2022-23. These new measures more than exhaust the projected increase in fiscal room, resulting in a somewhat larger budgetary deficit compared with our October outlook.
That said, we project that budgetary deficits will decline gradually, falling to $10.6 billion in 2022-23. This projected reduction is essentially due to restrained growth in the government's operating expenses, resulting from declines in future benefits for federal employees and slight decreases in the number of federal personnel through 2019-20.
In light of the various assumptions included in our economic outlook and in the absence of other strategic measures, it is unlikely that the budget will be balanced or in surplus in the medium term. However, we estimate that, in 2020-21, there is approximately a 75% chance that the federal debt-to-GDP ratio will be below the government's anchor of 30.9%.
I would also like to draw your attention to another report we published today that provides the PBO's independent costing of 10 large revenue and spending measures announced since October 2017.
These measures are fully reflected in our April fiscal outlook. All together, PBO’s costing of these new measures is $1.4 billion higher than the government’s estimates provided in budget 2018.
My colleagues and I would be pleased to answer any questions you have on our economic and fiscal outlook or any of the parliamentary budget officer's other analyses.