OTTAWA – The C.D. Howe Institute predicts Ottawa’s recently announced spending plans — which include a much bigger defence budget — will drive its deficits markedly higher in the coming years.
In a new analysis released today, the think tank says it expects Canada’s deficit to top $92 billion this fiscal year, given Prime Minister Mark Carney’s plan to meet NATO’s defence spending target of two per cent of GDP.
C.D. Howe says it expects deficit growth to slow after that but predicts deficits will still average around $78 billion annually over four years — more than double the level forecast by the parliamentary budget officer before the spring federal election.
The Liberal government did not publish a spring budget this year and has said it will instead push the planned fiscal update to the fall.
In addition to ramping up defence spending, Prime Minister Carney’s Liberals recently pushed forward legislation to accelerate major project development and delivered a one-percentage-point cut to the lowest income tax rate.
The C.D. Howe Institute accuses Ottawa of making costly commitments without showing the numbers to Canadians.
This report by The Canadian Press was first published July 3, 2025.
