Federal Deficit Lower Than Projected in 2025-2026 Economic Statement – Canada’s Fiscal Update Shows Improved Outlook

The Canadian federal government recorded a budgetary deficit of $25.5 billion from April 2025 to February 2026, significantly below the $78.3 billion projected for the full 2025-26 fiscal year in the fall economic update.

Finance Minister François-Philippe Champagne is set to release a spring economic statement on Tuesday, which will provide updated fiscal projections based on the first 11 months of the fiscal year.

The lower-than-expected deficit reflects stronger-than-anticipated government revenues during the period, although officials caution that March typically sees large one-month expenditures that could narrow the gap before year-end.

Last March, the federal government recorded a $23.9 billion deficit, and even a similar shortfall this month would keep the total well within the originally budgeted forecast.

Some private-sector economists anticipate the final deficit figure will be closer to the budgeted $78.3 billion than to the current $25.5 billion trace, noting that recent spending announcements may absorb much of the fiscal flexibility created by higher revenues.

Rebekah Young, vice-president of economic policy at Scotiabank, observed in an interview that while federal revenues have exceeded projections, she expects new and recent spending initiatives will use up most of that additional fiscal room.

“They’ll land closer to $78-billion than they will to the $25-billion,” Ms. Young said regarding her expectations for the deficit figure the minister will announce.

She added that March may have seen heightened spending activity, using the colloquial expression “March Madness” to describe potential outlays that reduced the apparent surplus.

The C.D. Howe Institute has urged the government to exercise caution in its fiscal planning, citing ongoing uncertainties in Canada-U.S. Trade negotiations and the conflict in the Middle East as factors that warrant prudent forecasting despite improved near-term economic indicators.

Budget 2025 had projected a deficit of $78.3 billion for the 2025-26 fiscal year, a figure based on economic forecasts from private sector forecasters surveyed in August 2025, which incorporated the actual National Accounts results for the second quarter of 2025 released on August 29, 2025.

Those forecasts had been revised downward due to concerns over U.S. Trade protectionism and its persistent impact on Canadian exports and economic performance, though recent data suggest the economy has shown greater resilience than initially anticipated.