PBO predicts $363-billion deficit, issues warning about stimulus spending

Parliament's spending watchdog says the federal government's response to the COVID-19 pandemic should send the deficit soaring to $363.4 billion.

In a report released this morning, budget officer Yves Giroux says the deficit should fall over time as emergency spending measures wind down over the next 12 months.

The economy is also faring better than Giroux anticipated. His office has revised its projections for economic growth starting in the second half of this year.

With the economy doing better than expected, and the deficit falling over time, the budget office predicts that federal finances will become sustainable again.

The economy also could get a boost from the Liberals' promise of three years of fiscal stimulus, valued between $70 billion and $100 billion. The stimulus plan is to be outlined in the coming federal budget.

Giroux's outlook doesn't account for that spending because of a lack of details about how it will be used — but he does warn it would result in larger deficits that may spin out of control, depending on how it's financed.