![]() ![]() ![]()
|
||||||||||||||||||||||||||||||||||||||||
|
![]() |
OverviewNovember 16, 2004 Highlights
Canada’s Resilient EconomyCanada’s economy has rebounded strongly in 2004, and is expected to exceed growth forecasts made earlier this year. Indeed, the Canadian economy grew at an annualized rate of 3.4 per cent in the first half of this year—up from 2 per cent in 2003. This strong rebound has produced a number of favourable results for Canadians. For example:
Stronger Global Economic GrowthMajor global economic forecasting agencies such as the International Monetary Fund (IMF) are predicting stronger world economic growth in 2004 and 2005.
Overall, the IMF predicts the global economy will expand by 5 per cent in 2004 and 4.3 per cent in 2005. However, high oil prices could have a dampening effect on global growth. As always, unforeseen geopolitical events could also have negative effects. Canadian Economic OutlookPrivate sector economists surveyed by the Department of Finance expect solid economic growth for Canada in 2004 and 2005. They expect growth to be 3 per cent in 2004, higher than forecast in the March 2004 budget, rising to 3.2 per cent in 2005. Several factors pose downside risks to these forecasts:
Canada’s Fiscal Outlook
These surpluses—totalling $29.5 billion—were arrived at after subtracting the annual $3-billion Contingency Reserve and additional economic prudence. In addition, these surplus projections take account of the recently announced new funding of nearly $75 billion over 10 years for health, equalization and Territorial Formula Financing (TFF) agreed to at the First Ministers’ Meetings in September and October 2004. The cost of the 10-Year Plan to Strengthen Health Care and the new framework for equalization and TFF amounts to $3.6 billion in 2004–05, rising to $6.7 billion in 2009–10. The surplus projections also take into account other spending decisions since the 2004 budget, primarily for assistance to the cattle and beef industry. However, the planning surplus does not include any savings from the Government’s expenditure review process, which is currently underway and should be completed in time for the next federal budget. Sound Fiscal Management—A Virtuous CircleTen years ago Canada was in a vicious circle of annual budget deficits and rising debt, high interest rates, high taxes, sluggish economic growth and lost jobs. Interest on the federal debt absorbed 38 cents of every dollar the Government took in. Today this vicious circle has been replaced by a virtuous circle. After seven consecutive federal surpluses, Canada now enjoys the benefits of a declining debt burden, a solid credit rating, low interest rates, lower taxes, consistently strong economic performance and the best rate of job creation among Group of Seven (G-7) countries. Instead of paying 38 cents of every revenue dollar to service the debt, the Government now pays about 19 cents. Greater Accountability and Value for MoneyThe Government is delivering on its commitment to provide greater accountability, transparency and value for taxpayer dollars by:
Challenges of an Aging PopulationCanada’s aging population poses two key challenges for our society.
Reforming and Strengthening Social ProgramsThe Government of Canada has recently reached long-term agreements with the provinces and territories on health care funding for the next 10 years. These agreements call for reforms focused on the needs of patients to ensure that all Canadians have access to the health care services they need, when they need them. To ensure that our publicly funded pension plan remains intact for the next generation of working Canadians, the Government has also taken steps to ensure the viability of the Canada Pension Plan for the next 50 years, making Canada one of the few countries in the world with a solid public pension plan. Finally, the Government has substantially reduced the federal debt. In this regard, it will continue to maintain balanced budgets or better and work towards achieving its goal of reducing Canada’s debt-to-GDP (gross domestic product) ratio to 25 per cent within 10 years. Building a More Productive EconomyThe Government is moving to address the productivity challenge by maintaining the right macroeconomic framework of balanced budgets, debt reduction, as well as low and stable inflation. By emphasizing education and lifelong learning, coupled with incentives to promote research and innovation, the Government aims to maintain and improve the "education advantage" that Canada now enjoys. The Government also recognizes that a key to improving Canada’s productivity is to create a more competitive environment that rewards entrepreneurs and offers every Canadian the opportunity to achieve their goals in this country. Making our economy more productive also requires ongoing efforts to ensure that Canada’s tax environment is as fair and competitive as possible. The Government will therefore look at ways to reduce taxes, particularly for low- and middle-income Canadians. |
||||||||||||||||||||||||||||||||||||||
|