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“We are choosing to put our strengthened fiscal position to work,” Sousa said Wednesday in Toronto, announcing he’d deliver a budget on March 28 with a deficit of less than 1 per cent of gross domestic product, which would mean less than $8 billion (US$6.2 billion). This year’s budget is balanced, he said. “I see challenges ahead.”

Photo by Sean Kilpatrick/The Canadian Press

Canadian provincial and federal governments are projected to run a cumulative deficit of $31.9 billion in 2017-18, fiscal tables published by Royal Bank of Canada show. That’s about 1.4 per cent of GDP. Ontario’s new deficit would push the 2018-19 total to as much as US$37.3 billion, or about 1.6 per cent of GDP.

The reasons are varied. Governments, for instance, have introduced new program spending aimed at reducing poverty and income inequality. The economy also faces a number of economic headwinds and risks — Donald Trump among them. Canada’s economy remains vulnerable to steel and aluminum tariffs while talks continue on a revamped North American Free Trade Agreement. Business investment also may be faltering in an era of uncertainty.

Politics is a factor. Ontario’s next election is in June, and Sousa used his speech Wednesday to attack his party’s top rival. Morneau’s budget included repeated elements of political posturing ahead of a federal vote in 2019.

Bank Sees Uncertainty

The Bank of Canada, which has lifted borrowing costs three times since July, indicated on Wednesday it’s in no rush to pursue further hikes in any aggressive way, citing the growing global trade tensions and softer housing data.