World Economy

Canada Faces Trade, Competitiveness Uncertainty

Bill Morneau says his next budget  will be introduced on Feb. 27.
Bill Morneau says his next budget  will be introduced on Feb. 27.

Finance Minister Bill Morneau will introduce the federal government’s next budget on Feb. 27 as the country faces persistent uncertainty around trade and competitiveness.

Morneau announced the date in the House of Commons Tuesday afternoon. And despite the dark clouds hanging over Canada’s most important trade pact and its corporate tax policy, the minister struck a tone of optimism, CBC reported.

“We’ve seen real improvements over the last couple of years for middle class Canadians, more confidence and among the lowest unemployment rates in the last 40 years, but there’s more work to do,” Morneau told the House.

Still, private-sector experts are expected to press Morneau to keep his fiscal powder dry when they gather later this week for their annual pre-budget meeting.

Morneau is scheduled to sit down Friday in Toronto with leading economists at a roundtable that typically includes about a dozen experts from commercial banks, think tanks and trade associations.

Finance ministers routinely call on outside economists for input and forecasts as part of the budget-writing process. Their projections are averaged to create a fiscal foundation for the budget.

Some economists say that late-2017 improvements in the economy likely will give Morneau more fiscal elbow room in the budget, compared to his October update. Others are less optimistic about the changes in recent months and expect the government to find itself in a similar budgetary position.

But regardless of the fiscal footing, there’s agreement that the government should proceed with caution. Economists want Ottawa to make sure it’s ready for the still-unknown impacts of the drawn-out renegotiation of the North American Free Trade Agreement and the US move to slash corporate taxes.

“Those are definitely the big two—there’s no question about it—and the kind of chill that that could potentially put on the business investment climate in Canada,” said Bank of Montreal chief economist Doug Porter, whose colleague will attend the Morneau meeting in his place. “That’s a tough twosome to deal with.”

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