Canada budget forecasts ‘soft landing’ in 2024, avoiding recession

Canada’s Finance Minister Chrystia Freeland has presented a new government budget to lawmakers – Copyright AFP/File Fabrice COFFRINI

Canada is expecting a “soft landing” this year and will avoid a recession due to slightly improved growth despite relatively high interest rates weighing on the economy, the government’s federal budget said Tuesday.

Economists surveyed by the government “expect the economy to avoid a recession,” it said, forecasting growth of 0.7 percent this year and 1.9 percent in 2025 — compared to 0.5 percent and 2.2 percent forecast in a November economic statement.

With rising costs of living vital to most Canadians, Finance Minister Chrystia Freeland’s budget presented a slew of new social spending to ease the pain, while asking the wealthiest to pay more in capital gains taxes to help offset outlays.

Most of the new spending was directed to shore up the support of younger voters ahead of an election expected in 2025, in areas of education, housing and jobs.

The budget “renews our focus on unlocking the door to the middle class for millions of younger Canadians,” Freeland said.

“We’ll build more housing and help make life cost less. We will drive the economy toward growth that lifts everyone up. That is fairness for every generation.” 

Funding was also earmarked in the budget for health care, fighting wildfires, enhancing Canada’s spy agency capabilities to combat foreign interference, and repairing roads to remote Indigenous communities damaged by climate change.

Small businesses meanwhile will gain a carbon tax rebate, and funds were made available for artificial intelligence research and startups.

Canada will also boost foreign aid by Can$350 million (US $253 million) over the next two years.

Freeland reported in the budget that the national debt will increase slightly to a new record high of Can$1.3 trillion in fiscal 2024-2025.

Canada’s debt-to-GDP ratio is expected to fall to 41.9 percent.

The deficit, meanwhile, is expected to come in a bit lower than originally expected to Can$39.8 billion, and remain stable before starting to fall in 2026-2027.