Finance Minister Jim Flaherty announced Thursday he will deliver a long-awaited economic update next week, even as a newly released report forecast a possible $5.3 billion in federal deficits over the next two years.

The Conservatives will be "setting out our own economic forecasts, as well as those of the private forecasters, in the update" at 4 p.m. Thursday, Flaherty said during question period.

"Canada is very well positioned compared to our G7 allies and relative to other economies, but the seriousness of this situation is not to be underestimated."

It didn't take long for the Opposition Liberals to pounce on Flaherty in the first question period since Parliament dissolved in September ahead of the Oct. 14 federal election.

"We're going into deficit," Liberal finance critic John McCallum told Flaherty in question period. "So will the minister admit that he has nowhere to hide, that the deficit belongs to him and his reckless policies and nobody else?"

Flaherty provided no clues about the country's current economic status, and did not say whether the government's books would be in the red.

Deficits likely: budget officer

His announcement about the fiscal update came after Canada's independent parliamentary budget officer released a report saying the country is unlikely to avoid the effects of an expected global recession and faces the possibility of deficits in at least the next two budgets.

The report acknowledges a worsening global financial climate has hit Canada, but says the Harper government's economic policies were partly to blame for the disappearing surplus.

The report singles out the second one-percentage-point cut in the goods and services tax and cuts in corporate income taxes for the shrinking surplus.

"This is not the time to increase the GST, as the leader of the Opposition suggested this morning, this is not the time to raise taxes, and we have lowered taxes and we are to keep them low," said Flaherty.

Liberal Leader Stéphane Dion had earlier zeroed in on the Harper government's tax polices.

"Mr. Harper leads the biggest spending by a federal government in Canadian history," said Dion Thursday.

"He spent, spent and spent, he cut the wrong taxes, and he left no buffer and no room to manoeuvre. Now his finance minister is considering a fire sale of government assets to keep the books balanced."

Flaherty said last week he is considering the sale of government assets, such as office and commercial buildings, in a bid to balance the books.

Flaherty, who had pledged during the federal election campaign that he would not run any deficits, has since refused to rule them out.