The government of Canadian Prime Minister Justin Trudeau will release new fiscal and economic forecasts on Tuesday, as inflation rises and some business groups and opposition politicians call for more spending restraint.
The fall economic update (FES) will be released at 4 p.m. ET (2100 GMT) and will include some new spending. According to a source, the FES will be "limited in scope" in terms of expenditure.
"We're going to be sharing not just where we are as an economy in our recovery, but also how we're going to continue to help people into the future," Trudeau told reporters on Tuesday, referring to the FES.
During the campaign for his re-election in September, the Liberal prime minister pledged C$78 billion ($61 billion) in new investment over five years to help Canada's economy recover from the coronavirus pandemic.
"My reading of the tea leaves would be: Even if the fiscal statement is light, it doesn't mean that the upcoming budget will be," said Tony Stillo, director of Canada economics at Oxford Economics.
Trudeau's government is expected to release its fiscal-year budget for 2022-23 in the first half of next year. The budget for this fiscal year included C$101 billion in investments spread over three years.
On Monday, the government announced that it would set aside C$40 billion ($31.1 billion) in the FES to compensate Indigenous children who faced discrimination in foster care and that payments would begin once a lengthy lawsuit was resolved.
After inflation reached an 18-year high, business lobbying groups and the opposition Conservative Party urged the government to cut spending. This is also due to the fact that the costs of servicing the country's debt are expected to rise beginning next year.
The Bank of Canada maintained its key overnight interest rate at 0.25% last week but stated that economic slack would be absorbed in the "middle quarters" of 2022, paving the way for the first-rate hike as early as April.
Last year, pandemic-related assistance for businesses and individuals resulted in the highest deficit since World War II. Already in October, Finance Minister Chrystia Freeland stated that Canada would significantly reduce spending on COVID-19 support programs now that more than 85% of the eligible population had been immunized.
In April, Freeland stated that debt as a percentage of GDP would gradually decline, providing a fiscal anchor in the future. Debt was projected in the budget to be 51.2% of GDP this fiscal year, falling to 50.7% the following year.