Lower-than-expected deficit, affordability measures take centre stage in Ottawa’s spring fiscal update 

Minister of Finance Francois-Philippe Champagne and Prime Minister Mark Carney before the Spring Economic Update is delivered on Parliament Hill in Ottawa April 28. Photo by Blair Gable/Postmedia

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The Liberal government’s spring fiscal update highlighted several new measures aimed at tackling affordability challenges across the country, as well as a deficit that is projected to be $11.5 billion lower than was anticipated in Budget 2025.

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Tuesday’s update now projects a $66.9-billion deficit for the 2025-2026 fiscal year, lower than the $78.3-billion deficit that was projected in the fall budget last November. The government also projected that deficits would stay below that level for the next two fiscal years, with a deficit projection of $65.3 billion in 2026-2027 and $63.1 billion in 2027-2028.

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Finance Minister François-Philippe Champagne said the lower deficit is due to a resilient economy that has been stronger than expected. Canada’s real GDP grew by 1.7 per cent in 2025 and the country avoided a recession, he said, even as tariff increases and trade tensions put pressures on economic activity.

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“We’ve been fiscally prudent, and that is what I think is in the mind of Canadians,” Champagne said during a news conference before he tabled the update.

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Kevin Page, chief executive of the Institute of Fiscal Studies and Democracy at the University of Ottawa, said the lower-than-anticipated deficit is a good thing.

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“I think some of the movement in those headline fiscal numbers is good. The government found itself with some additional revenue, and because the deficit came out a little bit lower, they chose to spend it on initiatives. They thought they needed to provide additional supports for people,” he said.

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But Page disagreed with the government’s assertion that the economy is strong.

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Real GDP grew below the pace of the previous two years — two per cent growth in 2023 and 2024.

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“I don’t think the economy is strong. I think the economy is weak. The economy came pretty much as expected in the November budget in terms of overall real GDP growth,” Page said.

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Tuesday’s fiscal update also comes as geopolitical uncertainty continues to put downward pressure on the Canadian economy, contributing to volatility and uncertainty, as well as higher consumer prices.

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Canada’s Consumer Price Index also increased by 2.4 per cent year-over-year in March, largely driven by a surge in gasoline prices due to the conflict in the Middle East that resulted in the closure of the Strait of Hormuz. Data from Statistics Canada suggests that prices surged 21.2 per cent from February to March, the largest price increase on record. Prices of food purchased from grocery stores also rose by 4.4 per cent year-over-year in March, after increasing by 4.1 per cent in February.

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While shelter inflation slowed in March with a 1.7 per cent increase, rent inflation was just above four per cent during the same time period.

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“We know that affordability is top of mind for Canadians, and we are happy to do our part,” Champagne said.