New Canada budget officer set to release forecasts

OTTAWA Nov 18 (Reuters) - Canada's parliamentary budget officer will publish his first economic and fiscal forecasts on Thursday as the country braces for a possible recession and the government's first budget deficit in over a decade.

The office of Kevin Page, which came into existence in March, said on Tuesday the outlook would reflect the average forecasts of private sector economists and would project the budgetary performance every year through 2012-13.

"There's a low and a high scenario, so a range of forecasts on the economy. And then we'll use that to look at the impact of the change in economic conditions on the budget 2008 fiscal projections," said Mostafa Askari, assistant parliamentary budget officer.

The budget officer, created by the Conservative government in the name of transparency, reports directly to members of Parliament. The report will be made public as of 10 a.m. (1500 GMT) on Thursday.

The idea of running a budget deficit in Canada has been political anathema since the 1990s when the previous Liberal government painfully eliminated it over a period of several years. Ottawa has subsequently posted annual surpluses, the only major industrialized country to do so.

The newly re-elected Conservative government of Prime Minister Stephen Harper insisted throughout this year's election campaign that it would continue to balance the books.

However, it has since allowed that a temporary deficit is likely. Finance Minister Jim Flaherty has said he expects to post a small surplus in the 2008-09 fiscal year but the budget might slide into deficit after that as the result of possible stimulus measures that have yet to be defined.

Flaherty has promised to provide the government's own revised fiscal outlook by the end of November.

In February, when the government laid out its spending plans for 2008-09, Flaherty saw a surplus this year of C$2.3 billion, down from C$10.2 billion the previous year.

He saw the surplus slimming down to C$1.3 billion in 2009-10.

Economists, including the influential chief economist of Toronto-Dominion Bank, Don Drummond, have estimated Canada could face a budget shortfall of up to C$10 billion next year.

The budget officer's report will also lay out some possible policy responses to the global financial crisis hurting the Canadian economy.

"We'll have a bit of discussion on policy, the way that governments may respond in this kind of situation," said Askari.

"They are not recommendations but options, and then essentially some long-term policy issues that need to be considered."

The Canadian economy has stagnated this year but has so far avoided a recession, according to the popular definition of two consecutive quarters of contraction.

Many economists now see an an inevitable slide into recession and will be watching to see whether Ottawa has adopted similar thinking.

The government's latest forecast is for 1.1 percent growth this year. (Reporting by Louise Egan; editing by Rob Wilson)