* Nominal GDP forecast cut to 3.3 pct from 4 pct-official
* Real GDP growth falls to 1.6 pct from 2 pct
* Gov't likely to cut spending to offset lower revenue
By Louise Egan
OTTAWA, March 18 The Canadian government's
budget on Thursday will grapple with how to compensate for a
C$2.1 billion ($2.06 billion) drop in revenues, a government
official said on Monday.
The official, who declined to be named, said the C$2.1
billion figure is based on a cut to a 2013 government forecast
for nominal gross domestic product to 3.3 percent from an
earlier forecast 4 percent.
Nominal GDP is the broadest measure of the tax base. The
general rule used by the federal government is that for every 1
percent drop in nominal GDP, revenues take a C$3 billion hit.
The outlook for real GDP growth is also weaker and is now
seen at 1.6 percent, compared with 2.0 percent previously, the
The federal government bases its fiscal projections on the
average forecast of a group of private sector economists.
Finance Minister Jim Flaherty met with the economists earlier
this month but did not divulge their numbers.
Flaherty has hinted at further cuts to direct government
spending on programs and services to offset possible revenue
shortfalls, but has said Ottawa will not touch transfer payments
to provincial governments or to individuals.
He said last week the lower growth outlook was a short-term
concern rather than a longer-term worry.