Budget Watchdog Projects Larger Deficits Than Forecast in Ottawa’s Spring Economic Update The Parliamentary Budget Office (PBO) forecasts a $4.6 billion increase in the federal government’s 2026 budget deficit compared to its spring projection. This revised outlook also anticipates lower economic growth. The PBO’s assessment follows Canada’s entry into a technical recession, marked by two consecutive quarters of GDP contraction.

• The PBO projects the federal budget deficit for 2026 to be $4.6 billion higher than previously estimated.
• Economic growth is also expected to be lower than projected in the spring economic update.
• The PBO’s June 4 Economic and Fiscal Outlook provides projections for economic growth, government spending, and inflation for 2026.
• These projections were released a week after Canada entered a technical recession due to two consecutive quarters of GDP contraction.
• The federal government’s April update projected a $66.9 billion deficit for the 2025-26 fiscal year, while the PBO now forecasts $72 billion.
• The increase in deficit is attributed to modest revenue growth being outpaced by growth in expenses.