Facing economic headwinds, province confident it can keep budget balanced
2020-21 budget is based on economic assumptions from last November
Karen Casey's confidence has turned to concern.
Two weeks ago, the province's finance minister stood in the legislature and started her budget speech with a glowingly optimistic view of the coming year.
"A new decade begins with renewed confidence and a continued commitment in our growing diversity and our strong and resilient economy," she said.
The assumptions were based on how things looked in November, although the closure of Northern Pulp on Dec. 20 was later factored in.
Overall, the finance department's economic assessment was equally upbeat.
"The global economy is projected to continue expanding, and the downside risks of recession have abated," said the budget documents.
Times have changed
But that was then.
"The [rail] blockade was concerning," Casey said Monday on what is likely the eve of a vote on her 2020-21 budget.
"The China trade is concerning. The coronavirus spread is concerning, absolutely."
Even though the full impact of the rail blockade, the reduction in exports to China and the ongoing spread of coronavirus still haven't been fully evaluated, Casey expects all three events will have an impact on her yet-to-be-adopted fiscal plan.
But Casey doesn't think the current economic turmoil will throw the McNeil government's fifth balanced budget into deficit.
"We have $55 million [in surplus]," she said. "We may have to make some other arrangements within the existing budget.
"We can maybe move things around, we can maybe look at programs that are not fully utilized. We would try to meet that need within our existing budget."
'Beyond our control'
Casey said there was no way to anticipate the current turmoil in the world markets.
"The fear of the coronavirus is something that is beyond our control but when we build a budget we build some capacity," she said. "We have our contingency which we believe may help us through."
Governments set aside money every year in anticipation of projects that may come to fruition during a budget year. They also squirrel away funds for what are called restructuring costs.
That single line item is 60 per cent larger this year than last. In 2019-20, the government spent close to $210 million in restructuring costs. The 2020-21 budget calls for $341 million.
"If we have to make some adjustments we have the flexibility to make them," said Casey.
She said, as finance minister, she's never seen the amount of economic shock the province has witnessed during the past two weeks.
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