-- Additional stimulus measures, the closing deficit for FY25-26, "guesstimates" on future deficits and issuance, and details behind plans for a sovereign wealth fund will be "key" in Canada's Spring economic statement and fiscal update due after the close on Tuesday, says Derek Holt, Vice-President & Head of Capital Markets Economics, at Scotiabank.
"Never take the deficit and issuance guidance seriously; Finance's track record is very poor on magnitudes and missed inflection points. So is the analyst community's track record," he says.
"That's because surprises, like commodity booms, come along, politics gets in the way by doing things like spending unexpected improvements and because the economy doesn't always perform to expectations whether good or bad. It's a tough business. Tougher than the strident talk that too often surrounds anyone's projections."
In this case, however, Canada's federal government may "hit" its deficit for FY25-26 or come in lower by spending all or most of the positive surprises, says Holt. He adds: "Higher prices are definitely helping the government since they tax all the booming commodities and the relevant price deflator isn't CPI -- it's the broad GDP deflator that guides nominal GDP as a driver of the fiscal position. The domestic economy may be performing better than feared. Rolling out the government's spending initiatives is fraught with uncertainty because of the sheer enormity and complexity of the varied programs. Additional spending measures are likely but they've pre-announced a lot as well."