Book Description

However, to date, discussions and analysis of budget deficits and the magnitude of fiscal actions required to stabilise the economy have not been based on estimates or couched in terms of the economic cycle. [...] In the absence of publicly available estimates, this note provides approximate estimates of the projected performance of the Canadian economy relative to its potential over 2008-2013 and the Government's structural budget balance over the period 2008-09 to 2012-13. [...] This range is consistent with estimates of potential growth provided by private sector forecasters and the Bank of Canada.3 • Next, the average private sector forecast of real GDP growth presented in the EFS (Table 1.1) provides the projection of "actual" real GDP over the 2008-2013 horizon from which the projected output gap is constructed. [...] Table 2 presents the EFS forecast of the budget balance before fiscal actions along with the output gap based on the EFS forecast of real GDP growth and assuming potential growth of 2.4% over the period 2008-2013. [...] In addition, by separating out the structural and cyclical components of the budget balance, the impact on the budget balance of stimulus measures can be appropriately identified.