Finance Minister Bill Morneau said the newly-elected Liberal government has inherited far more debt than expected in the wake of low oil prices and a global economic slowdown.
In his first economic update since taking over the federal finance portfolio, Morneau said Friday that Canada's overall growth has been revised down from two per cent in April, 2015, to 1.2 per cent.
The Liberal government also faces an updated fiscal baseline about $6 billion lower per year than what was forecasted in the Conservatives' April budget.
"Going forward, the risk to the Canadian outlook remains tilted to the downside, mostly reflecting low and volatile crude oil prices and a weak global economic environment," Morneau told reporters during a news conference in Ottawa.
He said Canada now faces a deficit of $3 billion in 2015/2016, and $3.9 billion in 2016/2017 before improving to a surplus beginning in 2019/2020.
Morneau added that the government "consciously" decided not to include any campaign commitments in the Finance Department's latest numbers.
"We wanted to show this is a situation that we've inherited," he said.
While economic conditions have deteriorated since April, Morneau said the government intends to keep its campaign promises of greater infrastructure spending and tax cuts to the middle class.
"We know it's just not possible to cut our way to prosperity," he said, adding that the government's campaign commitments will be the 鈥渇irst step鈥� to generate greater economic growth.
The Liberals had promised deficits of no more than $10 billion a year over the next three years before achieving a balanced budget in 2019.
Asked if, in the wake of a weaker economic outlook, the government would be willing surpass $10 billion of deficit, Morneau said 鈥渨e intend to keep the promises we have made."
The update includes average forecasts made last month by private-sector economists.
The economists are projecting an average real gross domestic of 1.9 per cent from 2015 to 2019, down from 2.1 per cent.
They also dropped their predictions for crude-oil prices from US$70 per barrel to an average of US$61 from 2015 to 2019.
Questions raised over Liberal campaign promises
Given the gloomy economic update, newly appointed Conservative finance critic Lisa Raitt questioned how the Liberal government plans to keep their campaign promises while not surpassing a $10 billion deficit.
"They haven't indicated how much more of a deficit they're willing to run, and that's a concern," Raitt told reporters during a news conference following the Morneau鈥檚 update.
Raitt also drew attention to the latest report from the parliamentary budget officer, that forecast a $1.2 billion surplus in 2015/2016.
"Cleary some of the money has already been spent," Raitt said. She suggested some of the money may have gone to the Liberal's aggressive Syrian refugee resettlement program that is reportedly pegged at $1.2 billion over the next six years.
The November report by the PBO suggested the new Liberal government was on track to face larger-than-expected baseline shortfalls in the coming years.
Meanwhile, NDP finance critic Guy Caron said the economic downturn is no excuse for the Liberals to go back on the promises they made to Canadians.
"Will the Liberals back track on their promises of change, will they run larger deficits, will they cut public services further," he said during a news conference Friday afternoon. "We call on the government to reject cuts and austerity and ask the wealthiest corporations to pay their fair share."
Caron said the Liberal government should look for a solution to deliver their promises, and added, "the New Democrats are ready to help."
With files from The Canadian Press
