The Liberal government's spring fiscal update, delivered on April 28, highlighted a lower-than-expected deficit and introduced several new measures aimed at addressing affordability challenges across Canada. The update projects a deficit of $66.9 billion for the 2025-2026 fiscal year, which is $11.5 billion lower than the $78.3 billion forecasted in the fall budget of November 2025.
Deficit Projections and Economic Context
The government also projected deficits for the following two fiscal years: $65.3 billion in 2026-2027 and $63.1 billion in 2027-2028. Finance Minister François-Philippe Champagne attributed the lower deficit to a resilient economy that performed better than anticipated. Canada's real GDP grew by 1.7% in 2025, and the country avoided a recession despite tariff increases and trade tensions that pressured economic activity.
However, not all experts agree with the government's assessment. Kevin Page, chief executive of the Institute of Fiscal Studies and Democracy at the University of Ottawa, described the lower deficit as positive but criticized the characterization of the economy as strong. He noted that real GDP growth was below the pace of the previous two years, which saw 2% growth in both 2023 and 2024. Page stated, "I don't think the economy is strong. I think the economy is weak."
New Affordability Measures
The fiscal update includes $6 billion for skilled trades training and a reduction in the Canada Pension Plan (CPP) contribution rate, among other measures. These initiatives are designed to ease financial pressures on Canadians amid rising costs. Champagne emphasized that affordability remains a top concern for Canadians, saying, "We know that affordability is top of mind for Canadians, and we are happy to do our part."
Inflation and Consumer Prices
The update comes amid ongoing geopolitical uncertainty that continues to weigh on the Canadian economy, contributing to volatility and higher consumer prices. Canada's Consumer Price Index rose by 2.4% year-over-year in March, driven largely by a 21.2% surge in gasoline prices from February to March—the largest monthly increase on record—due to the conflict in the Middle East and the closure of the Strait of Hormuz. Food prices also increased, with grocery store prices rising 4.4% year-over-year in March, up from a 4.1% increase in February.
Shelter inflation slowed to 1.7% in March, but rent inflation remained above 4% during the same period. These trends underscore the persistent affordability challenges facing Canadian households.
Reactions and Criticisms
While the government highlighted its fiscal prudence, Page expressed concerns about the overall economic weakness. He argued that the additional revenue gained from a slightly lower deficit was spent on initiatives that the government deemed necessary for providing support to people. However, he maintained that the economy is not strong, as real GDP growth came in as expected in the November budget.
The fiscal update also comes as the Bank of Canada and other economic observers weigh the impacts of trade policies and global tensions on Canada's economic outlook. The government's focus on affordability measures reflects the ongoing pressure on households from high inflation and interest rates.
