PBO slashes Canada growth forecast, raising questions for BoC path ahead
Deficits and the Nov. 5 budget
The PBO projects a $63.3-billion deficit in 2026-27, down from $71.8 billion in its June outlook. It then sees the shortfall peaking at $70.2 billion in 2027-28 and easing to $67.8 billion by 2030-31. New measures, including $36 billion for the Productivity Mega Deduction and $7.5 billion in tariff support, cost $52.6 billion over five years. That more than offsets $37.4 billion in additional fiscal room from stronger revenues.
Public debt charges are the fastest-growing federal expense, rising from $59.3 billion in 2026-27 to $83.0 billion by 2030-31. Federal debt per person is projected to climb from $33,436 to $39,191 over the same period. A permanent 100-basis-point rise in rates would add $5.1 billion to debt charges in the first year.
The PBO expects Ottawa to meet its operating-balance anchor in 2028-29, but not its goal of a declining deficit-to-GDP ratio. “A balanced operating budget anchor should not be interpreted as a balanced fiscal position,” Ryan said. “By design, it excludes debt-financed capital spending, meaning borrowing and debt can continue to grow while the target is being achieved.”
Finance minister François-Philippe Champagne said the budget, due Nov. 5, will “outline the next steps in our plan to build a stronger, more resilient and more affordable Canada,” The Canadian Press reported. The PBO’s numbers do not include measures from that budget. It judges risks to its outlook as roughly balanced, with trade policy the dominant uncertainty.
For brokers, the report is a prompt to revisit renewal scenarios with clients, particularly those in trade-exposed work, before the Bank’s decision and the budget land.
