Economic and Fiscal Update
December 17, 2008
1
Overview
Review forecast in Economic and Fiscal Statement
Changes since the Statement
Implications for the Government’s Fiscal position
2
November Economic Outlook
2008
2009
2010
2011
2012
(per cent, unless otherwise indicated)
2013
Real GDP growth
0.6
0.3
2.6
3.1
2.9
2.7
GDP inflation
3.8
0.5
1.8
2.2
2.1
2.1
1,603
1,615
1,687
1,779
1,870
1,960
2.4
1.9
2.7
3.9
4.3
4.4
Nominal GDP level ($ billions)
3-month Treasury bill rate
3
Evolution of consensus forecasts since July 2008
Blue Chip Consensus Survey, Real GDP Growth Outlook for 2009
Per cent
2.5
2.0
United States
Canada
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
July Aug Sep Oct Nov Dec
2008 2008 2008 2008 2008 2008
July Aug Sep Oct Nov Dec
2008 2008 2008 2008 2008 2008
Date of Forecast
4
Considerable uncertainty about economic
forecast
Forecast Distribution of Real GDP
Growth in 2009
Forecast Distribution of Nominal GDP
Growth in 2009
Per cent
Per cent
1.2
3
1.0
2009 Average = 0.8%
2
0.8
2009 Average = 0.3%
0.6
1
0.4
0.2
0
0.0
-0.2
-0.4
-1
-2
-0.6
-0.8
-3
Source: Department of Finance Survey of Private Sector Forecasters.
5
Private sector surplus projections (incorporating
November 3 Equalization announcement)
Private Sector Surplus projections before Fiscal Actions
2007–08
2008–09
2009–10
2010–11
2011-12
2012-13
2013-14
($ billions)
Conference Board of Canada
9.6
3.3
-2.5
-1.1
-0.4
0.6
3.2
University of Toronto
9.6
4.6
-4.8
-2.9
-1.5
-0.4
0.9
Global Insight
9.6
4.1
-9.7
-7.3
-6.6
-5.4
-3.7
Centre for Spatial Economics
9.6
3.5
-14.2
-9.4
-7.3
-3.8
2.1
Department of Finance
9.6
0.2
-5.9
-3.4
-1.9
1.8
5.7
Parliamentary Budget Officer
9.6
4.0
-3.9
-1.4
1.6
3.0
n/a
6
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
7
Statement took action to protect structural surplus
Summary of Changes in the Fiscal Outlook Since the February 2008 Budget
Projection
2008-09
2009-10 2010-11 2011-12
(billions of dollars)
Budgetary balance before Equalization and Statement
Actions
0.2
Putting Equalization on a Sustainable Growth Path
Budgetary balance before Actions in Statement
0.2
Effective Management of Government Spending
2012-13
2013-14
-7.9
-8.8
-7.7
-4.7
-0.2
2.0
5.4
5.8
6.6
5.9
-5.9
-3.4
-1.9
1.8
5.7
4.3
1.9
1.6
1.1
1.1
Appropriate Public Sector Compensation
0.6
0.6
0.9
1.0
1.0
1.0
Insured Mortgage Purchase Program
0.2
1.1
0.7
0.4
0.3
0.3
Temporary Reduction in RRIF minimum withdrawals
-0.2
Total
0.6
6.0
3.5
3.0
2.4
2.4
Revised budgetary balance
0.8
0.1
0.1
1.1
4.2
8.1
8
Range of economic views
Budgetary Balance
Billions of dollars
20
15
Private Sector - High Scenario
10
5
Average
0
-5
-10
Private Sector – Low Scenario
-15
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
9
Economic Developments Since Statement
• Weaker world economic outlook
• Weaker U.S. economic outlook
• Lower commodity prices
10
The financial crisis has sparked a global
recession
World Real GDP Growth Outlook
Per cent
12
2007 (actual)
2008 outlook
2009 outlook
10
8
6
4
2
0
-2
United States
Japan
Euro area
China
World
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.
11
U.S. economy continues to weaken more than
expected
U.S. Growth Outlook for 2009
Per cent
0.0
-0.3
-0.5
-0.8
-1.0
Blue Chip Consensus
-1.3
2008 Economic Statement
-1.5
Nov-08
Dec-08
12
Oil prices have dropped dramatically since July
2008
Weekly Crude Oil Prices
$US/bbl
150
140
130
120
110
100
90
80
70
60
50
40
30
Jan 6 Jun 22 Dec 7 May 24 Nov 8 Apr 25 Oct 17 Apr 3 Sep 18 Mar 4 Aug 19
2004 2004 2004 2005 2005 2006 2006 2007 2007 2008 2008
July 11
Lehman
Brothers
Nov 14 Survey
Dec 12
13
The U.S. recession began a year ago while private
sector forecasters expect that Canada is just now
entering a recession.
Index of Total Employment
January 2005 = 100
108
106
104
102
100
U.S. enters recession
Canada enters recession
98
Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct- Jan- Apr- Jul- Oct05
05
05
05
06
06
06
06
07
07
07
07
08
08
08 08
14
Updated Private sector outlook
2009
2010
2011
2012
2013
Real GDP growth
Statement
Updated forecast
0.3
-0.4
2.6
2.3
3.1
3.1
2.9
2.8
2.7
2.7
GDP inflation
Statement
Updated forecast
0.5
-0.2
1.8
2.0
2.2
2.3
2.1
2.0
2.1
2.0
1,615
1,599
1,687
1,670
1,779
1,761
1,870
1,846
1,960
1,933
1.9
1.3
2.7
2.1
3.9
3.3
4.3
4.3
4.4
4.5
1.7
1.9
2.0
2.0
2.0
2.1
2.0
2.0
Nominal GDP level ($ billions)
Statement
Updated forecast
3-month Treasury bill rate
Statement
Updated forecast
Total CPI
Statement
Updated forecast
1.1
1.9
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.
15
Implications for fiscal outlook (after Statement
measures)
Budgetary Balance
Billions of dollars
20
15
Private Sector - High Scenario
10
5
Average
0
-5
-10
Private Sector – Low Scenario
-15
2007-08
2008-09
2009-10
2010-11
2011-12
2012-13
2013-14
16