The combined federal and provincial stimulus measures will total more than 2% of GDP in the current fiscal year, estimates TD Economics

In a research note, TD says that this year’s federal and provincial budgets all share the goal of providing fiscal stimulus to the economy. “Much of the focus on fiscal stimulus measures has been placed on the federal government in view of its G20 commitment to take dramatic action. However, developments at the provincial level were every bit as important. In fact, by our estimates, provincial commitments will roughly double the overall amount of stimulus hitting the economy in the near term,” it adds.

“A back of the envelope calculation suggests that the amount of federal and provincial stimulus from discretionary actions exceeds 2% of GDP. Taking into account the infrastructure cash that has been earmarked in budgets, the ultimate tally could approach 3%,” it concludes.

Next year, the fiscal policy boost is likely to shrink, but only a bit, TD says.

“For one, although this fiscal year has been the focus of fiscal measures, many of the stimulus programs are being phased in over a two-year period. Second, despite building in expectations of a return to economic growth in 2010, most governments that undertake multi-year planning horizons are targeting budget positions that either deteriorate further or remain roughly on par with this year. Lastly, to the extent that capital projects planned for this year encounter delays, the fiscal boost could be further elevated,” it concludes.

IE