FISCAL MONITOR FOR APRIL TO DECEMBER 2013
For the first nine months of fiscal year 2013-14, the federal government posted a deficit of $12.7 billion, an improvement of $1.7 billion from the deficit of $13.6 billion reported in the same period in 2012-13. This marks a significant improvement from the fiscal performance in the previous eight months.
A surplus of $1.1 billion was recorded in December 2013, compared to a deficit of $0.7 billion in December 2012. We will have to wait and see if this turnaround in December was attributable to timing factors, which would then be reversed in subsequent months, or permanent, thereby suggesting that the deficit for 2013-14 could be better than forecast in Budget 2014.
Total budgetary revenues were up by $7.5 billion for the first nine months of 2013-14 on a year-over-year basis, slightly exceeding the change of $7.4 billion forecast in in Budget 2014. The year-over-year increases in GST, employment insurance (EI) premiums and other revenues are larger than those expected in Budget 2014 for the year as a whole, while corporate income tax revenues are somewhat lower. If these gains hold, the overall revenue target set out in Budget 2014 will be exceeded. However, even if this were to happen, about half of the $1.5 billion “risk adjustment factor” included in Budget 2014 would still be required to offset the shortfall in corporate income tax revenues.
For the first nine months of 2013-14, program expenses are up $6.2 billion, compared to the same period in 2012-13. In Budget 2014, an increase of $4.8 billion is expected for the year as a whole. However, year-over-year comparisons are currently distorted by the timing of bookings for various liabilities and budget measures.
In 2012-13, bookings for liabilities amounted to over $3 billion, but were largely recorded at the end of the fiscal year. This year, bookings of about a similar amount have already been recorded. Budget 2014 proposed additional restraint measures totally $1.7 billion, of which $1.1 billion is for the proposed cost sharing of the Public Sector Health Care Plan. According to media reports, the President of the Treasury Board is prepared to incorporate the necessary legislative changes in the Budget Omnibus Bill to ensure that these savings are realized in 2013-14. After adjusting for the timing of the bookings for “one-time extraordinary” liabilities, the year-over-year increase in total program expenses to date is somewhat lower than that expected for the year as a whole.
In Budget 2014, the Minister of Finance revised his deficit forecast for 2013-14 from the $17.9 billion forecast in the November 2013 Update to $16.6 billion. This is down $3.3 billion from the final audited outcome for 2012-13, but significantly less than the improvement of $7.4 billion recorded between 2011-12 and 2012-13.
As we noted in our article entitled “What are the Chances of a Balanced Budget in 2014-15 (www.3dpolicy.ca), the probability of eliminating the deficit in 2014-15 depends largely on how much better the deficit outcome will be for 2013-14. There will have to be a much larger decline in the deficit from 2012-13 to 2013-14 in order for the budget to be balanced in 2014-15