The federal government doesn’t need to ramp up spending cuts, and implementing them could harm Canada’s economy as it struggles with weak global demand, two major ratings agencies have said.Steven Hess, the lead Canada analyst for Moody’s, told the Wall Street Journal that there is a “risk to growth” if the government moves too quickly with austerity measures designed to return the country to balanced budgets.
With a budget deficit that amounts to about two per cent of GDP, there is “no rush” for Canada to address the problem, Hess said.
Though Ottawa has been systematically finding efficiencies in government departments since 2007, lower tax rates and the global economic crisis have forced the government into deficit spending in recent years.
Ahead of this year’s budget, expected to be tabled before the end of March, the Prime Minister’s Office has asked government departments to find 10 per cent in spending reductions.