Oct. 28 (Bloomberg) -- Canada’s federal budget deficit narrowed by 37.4 percent in August as the job market drove up employment insurance premiums and reduced benefit payments, and corporate tax revenue rose, the finance department said.
The federal government deficit narrowed to C$3.64 billion ($3.66 billion) in August, down from C$5.81 billion a year earlier, the department said in its monthly budget report. The deficit in the first five months of the fiscal year that began April 1 narrowed to C$10.7 billion from C$13.5 billion.
Finance Minister Jim Flaherty said Oct. 25 he will cut growth projections when he updates his fiscal plan in coming weeks, without saying how that will influence his plans to balance the budget by 2014. The government still aims to balance the budget “in the medium term,” Flaherty told reporters.
Canada’s budget deficit was a smaller-than-forecast C$33.4 billion in the year ended March 31, C$2.8 billion less than predicted in the June budget. Flaherty had projected a deficit of C$32.3 billion for this year in this fiscal plan.
In August, corporate tax revenue jumped 35.4 percent to C$1.59 billion and increased 6.7 percent in the first five months of the fiscal year to C$10.4 billion.
Employment insurance premiums were up 6.3 percent in August to C$1.23 billion, and have gained 7.6 percent in the five-month period. Payments of employment insurance benefits fell 15.5 percent in August to C$1.63 billion and are down 11.7 percent in the April-August period.
Canada’s unemployment rate in August fell to 7.1 percent, its lowest since December 2008, according to Statistics Canada data.
Flaherty’s office released estimates this week showing that economists forecast Canada’s economy will generate C$83 billion less in output between 2011 and 2015 than the government projected in June. That may reduce revenue by about C$12 billion over the period, according to a calculation based on government figures from the June budget that shows the government expects revenue to be about 15 percent of nominal output over that time.
Canada’s federal government will generate C$8 billion less in revenue through the fiscal year that ends in March 2016, according to a report yesterday by Toronto-Dominion Bank economists Derek Burleton and Sonya Gulati. That means that without additional measures, the country won’t run a surplus until the 2016-2017 budget year, two years later than Flaherty forecast.
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