Feds deliver fall economic statement with $61.9B deficit for 2023-24, amid political turmoil

Amid the news that Chrystia Freeland has resigned from her cabinet position as finance minister, the Department of Finance on Monday unveiled the long-anticipated fall economic statement, which reports a deficit of $61.9-billion for 2023-24.

The release of the fiscal update — which Government House Leader Karina Gould is tabling in Freeland’s stead — is already coming later in the year than is typical. It also comes amid uncertainty stemming largely from the looming threat from U.S. President-elect Donald Trump to impose 25 per cent tariffs on all imports from Canada.

Meanwhile, less than an hour before reporters and economic experts were set to enter a six-hour embargo to read the document, Freeland announced her resignation in a letter posted to social media, postponing the fiscal update’s lockup.

Freeland and Trudeau have found themselves “at odds about the best path forward for Canada,” the former wrote, an assertion she’s sought to downplay in recent days as reports of fraying tensions between the two top Liberals re-emerged.

The latest round of frustration between their two offices was reportedly connected to disagreements over measures such as the two-month GST/HST pause and the in-limbo $250 workers’ benefit cheques, as well as the government’s ability to abide by its fiscal anchors.

The 270-page document, meanwhile, touts what it considers economic victories, namely being the first G7 country in which the central bank cut interest rates, and inflation “anchored” at two per cent, chalking both up to “the government’s prudent fiscal management.”

Deficit larger than promised

Freeland in last year’s fall economic statement laid out self-imposed fiscal guardrails, namely keeping the debt-to-GDP ratio on a declining track, maintaining the deficit-to-GDP ratio below one per cent, and maintaining the deficit below the $40.1-billion target.

The projected deficit for this fiscal year, as laid out in the fall economic statement, however, is $21.8 billion beyond that $40.1-billion pledge.

Despite that, this new fiscal update paints the country’s finances in a positive light, stating the “economy has achieved a soft landing,” and pointing to the COVID-19 pandemic and Russia’s war in Ukraine as destabilizing and unprecedented global challenges.

“Amid global economic uncertainty, the government’s economic plan has laid a strong foundation to drive growth now and in the years to come,” the fall economic statement reads.

The fall economic statement maintains the federal government will achieve the declining debt-to-GDP ratio it has promised.

Government House leader Karina Gould rises to table the Fall Economic Statement in the House of Commons, in Ottawa on Monday, Dec. 16, 2024. THE CANADIAN PRESS/Adrian Wyld

The document also lays out the government’s economic plan, broken down into “four key pillars” of focus: “generational investments,” such as child care and dental care, “securing Canada’s AI advantage,” “overcoming geopolitical risks and uncertainty,” and investments for the industrial transition, namely when it comes to critical minerals.

But according to fiscal policy expert Fred O’Riordan, the tax policy leader for EY Canada, the reality is perhaps more grim.

While the document acknowledges much has changed in recent months, namely the re-election of Trump in the U.S., the projections in the fall economic statement are based on private sector economists’ forecasts from September.

“The forecast is quite likely overly optimistic, even the downside scenario, in light of the threat of tariffs from the U.S. and how Canada may respond,” O’Riordan said.

Trump’s tariff threat

Largely unaddressed in the fall economic statement are Trump’s specific threat of significant tariffs on imports from Canada. Instead, much of the fiscal update focuses on the tariffs Canada imposes on Chinese goods, as well as a focus on a policy of “reciprocity” when it comes to how Canada will deal with its trading partners in general.

The document states that “going forward, reciprocity will be considered as a requirement for all federal spending and policies.”

“This approach will be applied to a range of new measures including, but not limited to, government procurement, including subnational infrastructure spending, investment tax incentives, grants and contributions, technical barriers to trade, sanitary and phytosanitary measures, investment restrictions, and intellectual property requirements,” the fall economic statement reads.

The fall economic statement does not, however, lay out the possible economic costs of those reciprocity policies, nor does it cost out the potential impacts on both the U.S. and Canada’s economies if Trump imposes the promised tariffs and Ottawa responds with counter-measures.

When it comes to the border, Public Safety Minister Dominic LeBlanc has repeatedly said planning has been underway for months to boost both equipment and personnel. In that vein, the fall economic statement proposes to allocate a $1.3-billion border security package to several agencies and organizations, namely Public Safety Canada, the Canada Border Services Agency, the Communications Security Establishment, and the RCMP.

There are no specifics, however, as to how much money will go where, or what exactly it will pay for.

Notably, the fall economic statement also does not include any new defence spending beyond what the federal government has already announced.

Many former and current American lawmakers have warned that Canada needs to spend more, and faster, in order to meet the NATO defence spending target before 2032. They say defence spending is likely to be a point of contention for Trump.

Government expands some corporate tax credits

O’Riordan said something he’s glad to see outlined in the fall economic statement is expanding the eligibility for the scientific research and experimental development tax credit (SR&ED), which demonstrates a “pivot away from consumption-related expenditures to move measures geared at investment and economic growth.”

He called it “a step in the right direction,” also pointing to an extension on economic investment tax credits that were set to expire as positive measures included in the fiscal update.

On the document overall, O’Riordan said in his opinion, “it likely paints a rosier picture than the reality.”

“And most Canadians realize that,” he added.

Opposition parties, experts criticize document

Following Gould’s tabling of the document, several MPs rose on points of order to decry that they were not given time to ask questions about the document or its contents in the House of Commons, as there was no finance minister there to answer them.

In a statement Monday, Conservative Leader Pierre Poilievre said he is “flabbergasted” by the fiscal update, namely the “true deficit number.”

He added the Liberal-pledged $40.1-billion ceiling was already “mind bogglingly large.”

Also in a statement released Monday, the Bloc Quebecois says it’s denouncing the fiscal update, criticizing the “historic deficits caused by electoral priorities that pushed Finance Minister Chrystia Freeland to resign today, rather than take responsibility.”

The statement also criticizes the fall economic statement for being sparce on detail, but rather reiterating the federal government’s past and previously announced measures.

“A number, but not a plan,” the Bloc statement says, referring to the government’s plan to earmark $1.3 billion for border security.

The NDP also slammed the document, writing in a statement Monday that it “fails people.”

And a statement from the Greens says the fiscal update “fails to put people over profit.”

Meanwhile, Canadian Chamber of Commerce president and CEO Candace Laing wrote in a statement that compounding the issue is Canada’s need to prepare for how to address Trump’s tariff threats, calling it the “number one issue facing Canadian businesses.”

“Canada’s business community remains extremely worried by the government’s lack of a robust plan to tackle the expanding deficit and revive economic prosperity,” Laing wrote. “Any business owner knows the dangers of staying in the red year after year.

“The lack of fiscal accountability demonstrated in today’s Fall Economic Statement (FES), combined with a government in total disarray, creates profound instability for Canadian businesses and families at a time when we need the opposite,” Laing added.

With files from CTV News National Correspondent Rachel Aiello