Federal deficit narrows but budget still faces uncertainty amid oil’s collapse

OTTAWA — With just three months remaining in this year’s budget calendar, the federal government would seem to be heading into the black — meeting its election pledge of 2011 to balance the budget, and then some.

But a lot can happen, and has, on the way to the surplus target.

For one, oil prices have collapsed, sending Ottawa and the country’s resources-dependent provinces scrambling to recast their spending plans and avoid deep deficits from huge revenue shortfalls. For another, the overall economy was already sputtering along — with consumer spending still doing much of the pushing, while a long-anticipated growth in business investment and exports continues to lag behind.

Regardless, at this point, the federal Finance Department’s books still look relatively healthy. According to figures released Friday, Ottawa posted a deficit of $902 million for the first nine months of 2014-15. That’s down from a $12.18-billion shortfall during the same period a year earlier.

In December, there was a federal surplus of $2.43 billion, compared to $1.20 billion in December 2013.

Finance Minister Joe Oliver has penciled in a shortfall of $2.9 billion for 2014-15, followed by a $1.9-billion surplus in the coming fiscal year — in time for the scheduled October federal election and fulfilling the Conservatives’ 2011 campaign promise to get back into the black this year.

But the still-positive fiscal numbers are cold comfort for Alberta, the province most at threat from the fiscal impact of lost oil revenues and some drastic corporate cuts in the energy sector.

Premier Jim Prentice estimates income could fall by as much as $10 billion if the price of oil continues to trade around US$50 a barrel. It was just below US$49 on Friday.

Ottawa is also struggling to shave spending before the next federal budget, the timing of which is now in limbo. Mr. Oliver has already acknowledged the budget will not be ready before April, although there is speculation it could be pushed back even farther. The finance minister told reporters on Feb. 18 that “it could come after April.”

“Given the current market instability . . . we need all the information we can obtain before finalizing our decisions,” he told the Calgary Chamber of Commerce last month.

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