Federal government to run $1B deficit based on Bank of Canada forecast: PBO

The parliamentary budget office says based on the latest Bank of Canada economic forecast the federal government is on track to run a $1-billion deficit in 2015-16.

The Harper government projected a $1.4-billion surplus for this election year in its April budget.

The budget watchdog, however, recalculated the government’s fiscal outlook based on the downgraded forecast released last week by the central bank.

It shows Ottawa will stay in the red in 2015-16 and run smaller-than-expected surpluses of $600 million and $2.2 billion over the next two years.

The economy contracted in the first quarter of the year at an annualized rate of 0.6 per cent — in large part due to the drop in oil prices and the failure of oth