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Canada's Higher GDP Outlook Supports Strong Credit Rating, Lower Debt Services Costs, Says Desjardins

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The 2025-26 fiscal year (FY26) deficit was still a substantial $66.9 billion, but came in lower than the $78.3 billion projected in Budget 2025, said Desjardins after the government's figures late Tuesday.

A big part of the near-term improvement in the deficit was a better-than-expected economic performance, which is beyond the federal government's control, noted the bank. It is also something that may not be repeated.

Despite this improved starting point and economic outlook, the deficit forecast going forward is essentially unchanged from Budget 2025, pointed out Desjardins.

One of the major benefits of the upwardly revised nominal gross domestic product outlook is that it reduced the size of future deficits as a share of GDP, even if those deficits were largely unchanged from Budget 2025, stated the bank.

The projected path for the federal debt-to-GDP ratio is also "meaningfully" lower, despite the path of the federal debt not changing all that much, added Desjardins.

This will help to keep Canada in a better fiscal position than many of its advanced economy peers, supporting a strong credit rating and comparatively lower debt services cost, according to the bank.

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