December 17, 2008
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Transcript of December 17, 2008
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December 17, 2008December 17, 2008
Economic and Fiscal UpdateEconomic and Fiscal Update
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Overview
Review forecast in Economic and Fiscal Statement
Changes since the Statement
Implications for the Government’s Fiscal position
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2008 2009 2010 2011 2012 2013
Real GDP growth 0.6 0.3 2.6 3.1 2.9 2.7
GDP inflation 3.8 0.5 1.8 2.2 2.1 2.1
Nominal GDP level ($ billions) 1,603 1,615 1,687 1,779 1,870 1,960
3-month Treasury bill rate 2.4 1.9 2.7 3.9 4.3 4.4
(per cent, unless otherwise indicated)
November Economic Outlook
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Evolution of consensus forecasts since July 2008
Per cent
Blue Chip Consensus Survey, Real GDP Growth Outlook for 2009
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
July2008
Aug2008
Sep2008
Oct2008
Nov2008
Dec2008
July2008
Aug2008
Sep2008
Oct2008
Nov2008
Dec2008
Canada United States
Date of Forecast
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Considerable uncertainty about economic forecast
-0.8
-0.6
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
Source: Department of Finance Survey of Private Sector Forecasters.
Per cent
Forecast Distribution of Real GDP Growth in 2009
-3
-2
-1
0
1
2
3Per cent
Forecast Distribution of Nominal GDP Growth in 2009
2009 Average = 0.3%
2009 Average = 0.8%
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Private Sector Surplus projections before Fiscal Actions
2007–08 2008–09 2009–10 2010–11 2011-12 2012-13 2013-14
Conference Board of Canada 9.6 3.3 -2.5 -1.1 -0.4 0.6 3.2
University of Toronto 9.6 4.6 -4.8 -2.9 -1.5 -0.4 0.9
Global Insight 9.6 4.1 -9.7 -7.3 -6.6 -5.4 -3.7
Centre for Spatial Economics 9.6 3.5 -14.2 -9.4 -7.3 -3.8 2.1
Department of Finance 9.6 0.2 -5.9 -3.4 -1.9 1.8 5.7
Parliamentary Budget Officer 9.6 4.0 -3.9 -1.4 1.6 3.0 n/a
($ billions)
Private sector surplus projections (incorporating November 3 Equalization announcement)
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Statement took action to strengthen fiscal and financial positions and launch discussion on forward agenda
• Measures in Statement– Protect structural fiscal position– Reinforce financial system stability
• Set out priorities for forward agenda and consultations in preparation for Budget 2009
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Statement took action to protect structural surplus
2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
Budgetary balance before Equalization and Statement Actions 0.2 -7.9 -8.8 -7.7 -4.7 -0.2
Putting Equalization on a Sustainable Growth Path 2.0 5.4 5.8 6.6 5.9
Budgetary balance before Actions in Statement 0.2 -5.9 -3.4 -1.9 1.8 5.7
Effective Management of Government Spending 4.3 1.9 1.6 1.1 1.1
Appropriate Public Sector Compensation 0.6 0.6 0.9 1.0 1.0 1.0
Insured Mortgage Purchase Program 0.2 1.1 0.7 0.4 0.3 0.3
Temporary Reduction in RRIF minimum withdrawals -0.2
Total 0.6 6.0 3.5 3.0 2.4 2.4
Revised budgetary balance 0.8 0.1 0.1 1.1 4.2 8.1
(billions of dollars)
ProjectionSummary of Changes in the Fiscal Outlook Since the February 2008 Budget
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Billions of dollars
Budgetary Balance
Range of economic views
Private Sector - High Scenario
Private Sector – Low Scenario
Average
-15
-10
-5
0
5
10
15
20
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14
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Economic Developments Since Statement
• Weaker world economic outlook
• Weaker U.S. economic outlook
• Lower commodity prices
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Per centWorld Real GDP Growth Outlook
The financial crisis has sparked a global recession
-2
0
2
4
6
8
10
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United States Japan Euro area China World
2007 (actual) 2008 outlook 2009 outlook
Note: World GDP data are calculated on a purchasing power parity basis.Sources: IMF, World Economic Outlook Update (November 2008); Japan Economic and Social Research Institute; Eurostat; National Bureau of Statistics of China.
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U.S. economy continues to weaken more than expected
Per cent
U.S. Growth Outlook for 2009
-1.5
-1.3
-1.0
-0.8
-0.5
-0.3
0.0
Nov-08 Dec-08
Blue Chip Consensus
2008 Economic Statement
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Oil prices have dropped dramatically since July 2008
$US/bbl
Weekly Crude Oil Prices
30405060708090
100110120130140150
Jan 62004
Jun 222004
Dec 72004
May 242005
Nov 82005
Apr 252006
Oct 172006
Apr 32007
Sep 182007
Mar 42008
Aug 192008
July 11
Dec 12Nov 14 Survey
Lehman Brothers
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The U.S. recession began a year ago while private sector forecasters expect that Canada is just now entering a recession.
January 2005 = 100Index of Total Employment
98
100
102
104
106
108
Jan-05
Apr-05
Jul-05
Oct-05
Jan-06
Apr-06
Jul-06
Oct-06
Jan-07
Apr-07
Jul-07
Oct-07
Jan-08
Apr-08
Jul-08
Oct-08
U.S. enters recession Canada enters recession
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Updated Private sector outlook
Note: The Department of Finance’s survey of private sector forecasters is more up to date than Blue Chip’s. Blue Chip closed their survey on December 3rd-4th, while the Department of Finance’s survey closed on December 12th.
2009 2010 2011 2012 2013
Real GDP growthStatement 0.3 2.6 3.1 2.9 2.7Updated forecast -0.4 2.3 3.1 2.8 2.7
GDP inflationStatement 0.5 1.8 2.2 2.1 2.1Updated forecast -0.2 2.0 2.3 2.0 2.0
Nominal GDP level ($ billions)Statement 1,615 1,687 1,779 1,870 1,960Updated forecast 1,599 1,670 1,761 1,846 1,933
3-month Treasury bill rateStatement 1.9 2.7 3.9 4.3 4.4Updated forecast 1.3 2.1 3.3 4.3 4.5
Total CPIStatement 1.7 1.9 2.0 2.1 2.0Updated forecast 1.1 2.0 2.0 2.0 1.9
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Implications for fiscal outlook (after Statement measures)
Billions of dollars
Budgetary Balance
Private Sector - High Scenario
Private Sector – Low Scenario
Average
-15
-10
-5
0
5
10
15
20
2007-08 2008-09 2009-10 2010-11 2011-12 2012-13 2013-14