Canada cuts 2021/22 budget deficit forecast, cites strong economy

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OTTAWA, Dec 14 – Canada’s Liberal government on Tuesday cut its forecast budget deficit for the 2021/22 fiscal year, citing higher tax revenues and less emergency aid spending, while earmarking new funds to fight the Omicron variant.

In a fiscal update, the finance ministry said the deficit would be C$144.5 billion ($112.4 billion), down 6.6% from the C$154.7 billion forecast in April.

“Canada has largely recovered from the economic damage inflicted by COVID-19 and is poised for robust growth in the months to come,” Finance Minister Chrystia Freeland said in a prepared speech, adding the fight against COVID-19 remained “our most important national project.”

Ottawa though cut its forecast for 2021 real gross domestic product to 4.6% from 5.8% in April’s budget, citing disruptions in global supply chains.

The fiscal update document forecast Canada’s debt-to-GDP ratio would be 48.0% in 2021/22, versus 51.2% forecast in April, falling to 44.0% in 2026/27.

(Reporting by Julie Gordon and David Ljunggren; Reuters Ottawa bureau +1 647 480 7891;