Finance Minister Jim Flaherty.
Credits: REUTERS/Chris Wattie
OTTAWA -- The federal government's books are awash in red ink and will remain so one year longer than forecast in the March budget.
After months of hedging, Finance Minister Jim Flaherty finally conceded Tuesday in his fall update that the barrel-chested Canadian economy is sagging under repeated blows by the crushing European financial crisis and Uncle Sam's struggles.
So, instead of erasing the deficit by 2015-16, government bean counters are now counting on the year after to be in the black with years of surpluses to follow.
This year's projected $21.1 billion deficit is more likely to settle at $26.2 billion - creating a domino effect of higher deficits than planned until 2016-17, when the government is crossing its fingers for a $1.8 billion surplus.
"In the end, this update recognizes that our country is not immune to global forces," Flaherty said in a speech in Fredericton, N.B. "Nor can we control the economic shocks that ripple outwards from other nations."
One jolt Flaherty is bracing for is the brinkmanship in Washington over a $600 billion combination of tax hikes and spending cuts known as the fiscal cliff that becomes law in the New Year.
Economists warn that if legislators can't find common ground to avert a calamity, the American economy will fall into recession and Canada would follow - further adding to the annual $7.2 billion in revenues the government is losing.
Flaherty blamed those losses on falling commodity prices, slower GDP growth and the ongoing international instability.
Despite the budgetary knock, Flaherty used outlooks by the International Monetary Fund and the OECD to show Canada is doing better than other G-7 countries and has weathered the global downturn better than most.
Opposition MPs used the fiscal report card to paint the Conservatives as poor stewards of the economy with no long-term plan to create jobs.