Last week, the government reported its deficit was a $4.4-billion during the first two months of the fiscal year. It was considered to be a big improvement over last year, when the economy was still mired in recession and the government spent $7.5 billion more than it took in. According to CBC, that was because tax revenues were down and social and economic spending to offset the slump was higher.

On the other hand, now, the fiscal improvement is significant thanks to higher-than-expected revenue from personal income taxes and the goods and services tax. Four month ago, a budgetary shortfall of $54 billion in 2010 was projected. With the nominal growth in the economy of 4.9 % which was forecasted in that time, Ottawa expected to eliminate annual deficits through spending cuts by 2016. But now, a think-tank Conference Board of Canada in its report is predicting that the economy will grow 7.2% this year. It means that if the government constrains spending, the budget deficit will be eliminated by 2015.

However, provinces will have some difficulties to re-balancing their books in the near future. The collective deficits of provinces together will be almost $34 billion by 2010, analysts said. Ontario is one of those which will probably face greater challenges. Their stimulus spending in the recession, as well as revenues is declining meanwhile health-care costs are mounting. According to some experts, structural changes will be needed.

Miroslava Hospodarova

Photo: ISIFA