Morneau to talk Trump with private-sector forecasters ahead of 2017 budget

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Finance Minister Bill Morneau will meet with private-sector economists Friday for closed-door talks that are expected to focus heavily on how Canada should prepare for the new political landscape in Washington.

The prebudget meeting is taking place several weeks earlier than last year, which could potentially be a sign that Mr. Morneau is planning an earlier-than-usual budget. Federal budgets are commonly delivered in March.

BMO senior economist Sal Guatieri, who will be attending Friday's meeting in Toronto, said the timing could signal a desire by Mr. Morneau to get a "head start" on final budget planning given the heightened degree of uncertainty as to whether a Donald Trump presidency and a Republican-controlled Congress will hurt or help the Canadian economy.

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"There's a lot of issues on the table both good and bad, possibly, for Canada," he said. "Lower taxes, fewer regulations in the U.S. could jump-start their economy and clearly support Canadian exports, but at the same time there are trade protectionist measures as well that could be entertained and that probably would not be good for Canada."

Private-sector forecasters typically submit their latest forecasts for the Canadian economy to the Finance Department ahead of the meeting. Those forecasts are then merged into a consensus estimate that becomes the foundation of the federal budget's assumptions for economic growth, inflation, revenue and spending.

The latest private-sector forecasts have not changed much from a few months ago, when Mr. Morneau released a fiscal update on Nov. 1. The fall economic statement projected real GDP growth of 2 per cent for 2017 and 1.8 per cent for 2018.

A December survey of 26 private-sector forecasters by FocusEconomics produced a consensus forecast of 1.9-per-cent growth in 2017 and 1.9 per cent for 2018.

The fall fiscal update projected a deficit of $25.1-billion in the 2016-17 fiscal year and $27.8-billion the following year.

A report released this week by Parliamentary Budget Officer Jean-Denis Fréchette found federal spending on infrastructure appears to be happening at a slower pace than originally planned. That finding was in line with a December statement from the Bank of Canada that "the effects of federal infrastructure spending are not yet evident in the GDP data."

Estimating the timing and impact of promised infrastructure spending is a preoccupation of economic forecasters as they prepare their projections.

Conference Board of Canada chief economist Craig Alexander, who will also be attending Friday's meeting with the minster, said his forecasts had assumed that promised infrastructure spending for 2016 likely wouldn't enter the economy until 2017.

"History tells us it takes a lot longer to get the money out the door than governments plan for," he said. "Particularly if you are trying to invest in the right projects that are going to have the biggest boost to the economy and not the shovel-ready ones that you can do immediately."