Canadian year-to-date budget deficit narrows

OTTAWA (Reuters) - Canada’s federal budget deficit dropped in the first five months of the fiscal year, falling to C$6.2 billion ($6.2 billion) in April to August from C$9.03 billion in the same period of last year, the Department of Finance said on Friday.

The monthly deficit in August increased slightly to C$3.17 billion from C$3.1 billion in August 2011.

Revenues in the first five months of the fiscal year were up by 3.4 percent compared with the same period in 2011, reflecting higher income tax revenues, excise taxes and duties, the finance department said.

Program expenses rose by 1.5 percent, mainly due to higher transfer payments.

August revenues grew by 2.0 percent from August 2011 while program expenses increased by 2.6 percent.

In its 2012-13 budget the government forecast a deficit of C$21.1 billion for the current financial year.

But Finance Minister Jim Flaherty said last week that Canada might have to downgrade its economic and fiscal forecasts to take into account the European debt crisis and the choppy U.S. recovery.

Kevin Page, Canada’s parliamentary budget officer, is due to release his updated medium-term outlook for the Canadian economy and the government’s fiscal position at 9 a.m. eastern on Monday.

The Conservative government and Page have clashed in the past over his calculations.

Reporting by David Ljunggren; Editing by Jeffrey Hodgson and Chizu Nomiyama