Government well positioned to weather storms

The federal government's updated fiscal plan released last week, which reiterated the commitment to control program spending, is likely to come undone next year if, as we fear, economic growth slows by more than the government's projections suggest. The negative impact of slower economic growth, however, should be partially offset by lower than budgeted debt servicing costs as government bond yields remain at unusually low levels. Although the small budget deficit might linger for longer, the government remains in a good position to weather foreign and domestic headwinds.