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Economic and Fiscal Update Overview - December 2008 Forecasts and Implications

The Economic and Fiscal Update of December 17, 2008, reviews and revises the forecasts presented in the Economic and Fiscal Statement. Significant changes and their implications for the government's fiscal position are discussed, with a focus on the evolution of consensus forecasts since July 2008. Notable uncertainty surrounds economic outlooks, with projections for Real GDP growth showing averages of 0.8%. The statement also addresses measures to protect fiscal stability and outlines a forward agenda in preparation for the 2009 Budget amidst the global economic downturn.

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Economic and Fiscal Update Overview - December 2008 Forecasts and Implications

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  1. Economic and Fiscal Update December 17, 2008

  2. Overview • Review forecast in Economic and Fiscal Statement • Changes since the Statement • Implications for the Government’s Fiscal position

  3. November Economic Outlook

  4. Evolution of consensus forecasts since July 2008 Blue Chip Consensus Survey, Real GDP Growth Outlook for 2009 Per cent Date of Forecast

  5. Considerable uncertainty about economic forecast Forecast Distribution of Real GDP Growth in 2009 Forecast Distribution of Nominal GDP Growth in 2009 Per cent Per cent 2009 Average = 0.8% 2009 Average = 0.3% Source: Department of Finance Survey of Private Sector Forecasters.

  6. Private sector surplus projections (incorporating November 3 Equalization announcement)

  7. Measures in Statement Protect structural fiscal position Reinforce financial system stability Set out priorities for forward agenda and consultations in preparation for Budget 2009 Statement took action to strengthen fiscal and financial positions and launch discussion on forward agenda

  8. Statement took action to protect structural surplus

  9. Range of economic views Budgetary Balance Billions of dollars Private Sector - High Scenario Average Private Sector – Low Scenario

  10. EconomicDevelopments Since Statement • Weaker world economic outlook • Weaker U.S. economic outlook • Lower commodity prices

  11. The financial crisis has sparked a global recession World Real GDP Growth Outlook Per cent 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.

  12. U.S. economy continues to weaken more than expected U.S. Growth Outlook for 2009 Per cent

  13. Oil prices have dropped dramatically since July 2008 Weekly Crude Oil Prices $US/bbl July 11 Lehman Brothers Nov 14 Survey Dec 12

  14. The U.S. recession began a year ago while private sector forecasters expect that Canada is just now entering a recession. Index of Total Employment January 2005 = 100 U.S. enters recession Canada enters recession

  15. 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.

  16. Implications for fiscal outlook (after Statement measures) Budgetary Balance Billions of dollars Private Sector - High Scenario Average Private Sector – Low Scenario

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