(Adds government and opposition reaction, latest budget
figures)
By Randall Palmer
OTTAWA, July 22 (Reuters) - Canada's Conservative government
insisted on Wednesday it would balance the country's books this
year despite a watchdog's report that said economic weakness
would turn the narrow budget surplus the Conservatives pledged
into a billion-dollar deficit.
The Conservatives, facing an Oct. 19 general election, have
repeatedly cited their plan to deliver Canada's first budget
surplus since the financial crisis as evidence of their strong
economic credentials.
But the office of the Parliamentary Budget Officer (PBO),
which has a mandate to provide independent analysis to
lawmakers, forecast on Wednesday a deficit of C$1.0 billion
($770 million) for 2015-16, after using up the budget's C$1
billion contingency reserve and factoring in other economic
developments.
The government's budget in April had projected a C$1.4
billion surplus plus the reserve. The economy has since been
struggling due to sharply lower prices for oil, a major Canadian
export.
Defending the government's target, Rob Nicol, spokesman for
Prime Minister Stephen Harper, noted there was already a budget
surplus of C$3.95 billion for April and May, compared with a
C$1.15 billion deficit for the same period in
2014. ID:nT5N0XR00X
He did not say whether the government would implement more
spending cuts to ensure a surplus, but Liberal legislator Scott
Brison said: "With the economy flat-lined, with the economy
actually shrinking, it's not a time to cut further."
Brison declined to say if the Liberals would run a surplus
this fiscal year if they win October's election.
The left-leaning New Democratic Party (NDP), leading in many
opinion polls, said the Conservatives have staked their brand on
a balanced budget.
"They failed to build a balanced economy and will leave
Canadians with another budget deficit," said NDP Member of
Parliament Nathan Cullen.
The PBO report forecast that the government's projection of
a C$1.7 billion surplus for 2016-17 would be reduced to C$600
million after using up the reserve. It predicted a C$2.2 billion
surplus for 2017-18, versus the government's C$2.6 billion
projection in the April budget.
Brison and Cullen had requested the PBO report after the
Bank of Canada downgraded its real economic growth forecast for
calendar 2015 last week to 1.1 percent from 1.9 percent because
of lower oil prices. The budget assumed 2.0 percent growth,
based on private-sector forecasts.
The PBO analysis assumes government spending plans would
remain as in the budget, though governments do sometimes spend
less than budgeted.
($1=$1.30 Canadian)
(Editing by Jeffrey Hodgson; and Peter Galloway)