Finance Minister Jim Flaherty says Canada is 'on track' to return to surpluses in the 2015-16 fiscal year. Finance Minister Jim Flaherty says Canada is 'on track' to return to surpluses in the 2015-16 fiscal year. (CBC)Canada's federal deficit for the 2009-10 fiscal year is a record $55.6 billion, Finance Minister Jim Flaherty announced Tuesday.

That figure is almost $2 billion higher than the $53.8-billion deficit projected in the federal budget last March, and was largely prompted by a one-time transfer of $5.6 billion to Ontario and British Columbia to help them make the transition to the harmonized sales tax.

But thanks to more robust growth earlier this year, the deficit for the current 2010-11 fiscal year will likely come in $3.7 billion lower than the $49.2-billion figure projected earlier, Flaherty told a business luncheon in Mississauga, Ont.

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The finance minister said the country's books will continue to improve, with a small deficit of $1.7 billion now forecast by 2014–15 and a surplus of $2.6 billion by the following year.

Flaherty said the economy remained the government's "No. 1 priority." His speech contained no new spending or tax announcements. Current stimulus measures are scheduled to wind down next March.

GDP growth slowing

Flaherty met last week with more than a dozen private-sector economists. He said their consensus has Canada's GDP growth slowing to 1.8 per cent in the third quarter of this year.

According to the economists, growth should pick up to an average of about 2.5 per cent in the following three quarters, Flaherty said.

"They also highlighted that the near-term global economic outlook remains uncertain, with the balance of risks tilted to the downside," he said, adding that the strength of the U.S. recovery remains a potential trouble spot for Canada.

Canada is the only G7 country to have recovered most of its economic activity since the recession began, Flaherty said.

"As a result of Canada's solid economic performance over the recovery to date, nearly 423,000 jobs have been created in Canada since July 2009, more than were lost as a result of the global recession," he told his audience.