UPDATE 1-Canada says budget gap smaller than expected

* Preliminary deficit nearly C$7 bln smaller than estimate

* Ottawa says fiscal projection broadly on track

* Says C$19 bln of deficit due to stimulus plan

OTTAWA, May 28 (BestGrowthStock) – The Canadian government’s
preliminary calculation of its budget deficit for the 2009-10
fiscal year is nearly C$7 billion ($6.8 billion) smaller than
anticipated as corporate tax revenue exceeded expectations.

The Department of Finance said the results it reported on
Friday could be subject to significant adjustments in coming
months. The final budget figures for the year will be released
in September.

The shortfall for the 12 months ended March 31 was
calculated at C$46.96 billion. This is a far bigger hole in the
government’s books than in 2008-09, when the deficit totaled
C$2.2 billion. Still, it is an improvement on the government’s
conservative estimate earlier this year of a C$53.8 billion
deficit for 2009-10.

Ottawa maintained a cautious tone about its fiscal outlook,
despite the good news.

“While the results to date – particularly for budget
revenues – are stronger than anticipated in the 2010 budget,
given the potential for further adjustments … as well as
ongoing global economic uncertainty, the government judges that
the fiscal projection set out in the 2010 budget remains
broadly on track,” the report said.

Almost C$19 billion of the estimated deficit was due to
Ottawa’s economic stimulus plan, designed to fight recession,
the government said. Most of the stimulus spending will be
phased out in early 2011, but the plan also included some
permanent tax cuts, the effects of which will persist.

In the month of March, the deficit totaled C$6.43 billion
compared with a deficit of C$3.51 billion in March last year.

Revenues in the fiscal year fell 5.5 percent while program
expenses climbed 16.6 percent and transfer payments were up
17.6 percent.

Finance Minister Jim Flaherty, who has been admonishing his
Group of 20 counterparts to wrestle down their public debt,
said in his 2010 budget plan that Canada would eliminate its
deficit by 2015-16, assuming an economic recovery and some
curbs on spending growth.

He projected a smaller deficit in 2010-11 of C$49.2
billion.

As a percentage of GDP, Canada’s fiscal gap is fairly
modest by international comparisons at about 3 percent.

But a recent report by the DBRS bond rating agency
estimated Canada’s aggregate debt, which includes provincial
government debt and pension liabilities, amounts to about 78
percent of gross domestic product.

Stock Investing
($1=$1.05 Canadian)
(Reporting by Louise Egan; editing by Peter Galloway)

UPDATE 1-Canada says budget gap smaller than expected