Canada Politics


Economy to play pivotal role in upcoming election

On 2 August, Canadian Prime Minister Steven Harper initiated an 11-week election campaign that spans the period of time between the closing of parliament and the federal elections scheduled for October 19. The decision to launch such an unusually-long campaign period has attracted criticism from opposition parties, who claim that the Prime Minister’s well-funded Conservative Party has an advantage during this period. The economy will take center stage in the elections; as analysts widely expect that GDP contracted in Q2 and, depending on the outcome of the election, the government’s approach to fiscal policy, deficit spending and taxation could shift drastically.

Polls conducted in early August indicated that the race was too close to call, with no major parties showing a significant lead. However, since then, polls have shifted and now show the left-leaning New Democratic Party (NDP) as the favored party amongst Canadians. According to a poll conducted by Forum Research, the NDP enjoys the support of 40% of Canadians, putting them in the realm of possibly obtaining a parliamentary majority. The Liberal Party increased its share of support to 30%, while the Conservative Party fell to third place with support from 23% of Canadians.

Q2 GDP, which is set to be released on 1 September, is expected to have contracted for the second consecutive quarter. The release will no doubt influence the campaign period as the state of the economy is a crucial point for all of the parties in the race. Although the downturn in the Canadian economy was set off by external factors such as last year’s precipitous decline in energy prices, opposition parties will no doubt capitalize on the state of the economy, claiming that the Conservative-led government has not done enough to bolster the economy. The government will be hoping for a stronger result, however, and will use Canada’s past post-recession economic performance as political leverage.

FocusEconomics panelists have continually downgraded their GDP forecasts for 2015. The outlook has been cut by more than half since the beginning of the year, dropping from a projection of 2.5% GDP growth in January to 1.3% in September. The government has campaigned heavily on its record of maintaining a balanced budget in past years, though some assumptions regarding revenue in the government’s April budget are no longer realistic, placing 2015’s expected fiscal surplus in jeopardy. Meanwhile, the Liberal party has come out saying that they plan on running a modest deficit if elected, in order to finance infrastructure projects over the next three years. The state of the economy and the government’s finances are set to play a pivotal role in this year’s election campaign as voter’s become increasingly aware of the headwinds facing the Canadian economy.

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