CANADIA ON TRACK TO REDUCE $28.4 BILLION FEDERAL DEFICIT?

OTTAWA, Canada — Ottawa appears to be on a faster track to reduce the federal deficit, thanks to strong economic growth at the end of last year and the start of this year. The Finance Department reported Thursday that February's shortfall was a slim $600 million, raising the annual deficit to $28.3 billion with one month remaining in the fiscal year.
Last month, Finance Minister Jim Flaherty (right photo) shaved the deficit projection for the 2010-11 fiscal year to $40.4 billion, about $5 billion less than what was projected in the October update.

• But with March accounting remaining, Ottawa is $12.1 billion to the better of even that improved deficit projection. Economists noted that the final month, and subsequent adjustments, traditionally can result in wild swings in the fiscal position, but the current gap is unusually large this late into the fiscal year.
• One unknown in this year's accounting is the extent to which expenses for the government's stimulus spending program remain to be registered.
• More than $14 billion of the deficit so far is attributable to the stimulus package, including tax cuts, infrastructure spending and improved employment insurance benefits. But there is no doubt that the economic resurgence of the past six months has dramatically improved Ottawa's fiscal position.

The Canadian economy grew by a surprisingly strong 3.3 per cent in the last quarter of 2010 and was expected to have expanded by more than four per cent in the first quarter of 2011, which has the effect of increasing income tax revenues and decreasing costs, such as payouts for unemployment insurance.

• The department said February saw a $1-billion increase in revenues from higher personal and corporate income tax filings. For the first 11 months of the year, revenues were up by $13.1 billion, or 6.6 per cent, over last year.
• Meanwhile, program expenses were down by $400 million, or 0.2 per cent.
• The lower annual expenses were largely due to the fact the one-time 2009-10 bailout of the auto industry has come off the books, but also due better economic conditions.
• Receipts from personal income taxes rose by 5.8 per cent in the current fiscal year so far, while receipts from corporate income taxes rose 6.2 per cent, despite a cut to the tax rate. GST receipts were up 8.7 per cent.
• "Other revenues were up $2.8 billion, or 13.4 per cent, reflecting an increase in net profits of enterprise Crown corporations, as well as gains realized on the government's sale of common shares in General Motors," the department added.

Deficit financing has taken a toll on the costs faced by Ottawa to service the growing national debt, however. Public debt charges were $1.3 billion more as of February than the previous year.

Source: CTV