Canada posted a budget deficit of $744 million for the first half of the 2014/2015 fiscal year compared to $10.35 billion in H1 2013/2014, according to the Finance Department on Friday.
Earlier in November, the Canadian government had predicted a $2.9 deficit for the whole year (Apr 1, 2014, to Mar 31, 2015). Prime Minister Stephen Harper’s government promised that in the following year there would be a $1.9 billion surplus.
The Finance Department posted a $379 million budget surplus for the month of September, compared to a $3.77 billion deficit in the same month last year.
Revenues were $1.15 billion (5.4%) up, due to higher revenues from corporate and personal income taxes.
Expenditure declined by 12.8% or $2.88 billion, thanks to money the government set aside last year to help clear up the aftermath of a serious flood in Alberta.
Mr. Harper, who faces general elections next year, has pledged tens of billion until the end of this decade for a family-themed tax-relief program. He is also committed to spending $5.8 billion until 2018 on infrastructure.
The government predicts that revenue growth will decline by at least $3 billion in 2014 and $16 billion next year due to the drop in oil prices.
On Friday, Statistics Canada reported that GDP (gross domestic product) grew at an annual rate of 2.8% in the third quarter, much more than analysts had expected.
However, this rate of expansion is unlikely to continue given the fall in oil prices.
With oil prices falling by about 35% since their June peak, Canada’s provincial and federal governments will need to have another look at their future spending plans.