Bennett Jones | Assessing the Potential Risks to the Sustainability of the Government of Canada’s Current Fiscal Plan

The Government of Canada’s current fiscal plan may not tell the full story of the country’s financial path.

Budget 2022 and the November economic statement have laid out a fiscal plan based on plausible but optimistic assumptions about the economic and interest rate context that Canada will operate in for the foreseeable future. There are three key risks to the sustainability of the currect fiscal plan that we address in our assessment:

1. planned spending is unlikely to be adequate to deliver the policy goals set out by the government;
2. there is a high likelihood of a more severe recession in 2023;
3. and medium-run inflation pressures are highly likely to continue and interest rate to remain well above pre-COVID levels.

In actuality, should these risks occur simultaneous even to some degree, there is a significant risk that our two measures of fiscal sustainability—the debt service/revenue and debt/GDP ratios—exceed comfortable levels over the remainder of this decade.

Bennett Jones’ Senior Advisors David Dodge and Richard Dion are joined by Robert Asselin, Senior Vice President of Policy at the Business Council of Canada, in presenting this report detailing the alternative scenarios that the Government of Canada’s plan does not outline. This report would be of key interest to anyone involved in personal or business financial planning for the year ahead.

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Compliments of Bennett Jones LLP – a member of the EACCNY.