Canada Budget and Current Account Deficits Narrow

Canada's federal budget deficit for the 2024–25 fiscal year narrowed to approximately CAD 43.2 billion, down from CAD 50.9 billion the previous year, mainly due to increased corporate and personal income tax revenues. In March 2025, the monthly deficit decreased to CAD 23.9 billion from CAD 33.6 billion in March 2024. Program expenses rose by 9% and public debt charges by 13%, reflecting higher bond rates, but overall revenues grew by 11.3%, contributing to the deficit reduction. Additionally, Canada's current account deficit narrowed significantly to CAD 2.1 billion in Q1 2025 from CAD 3.6 billion in Q4 2024, outperforming market expectations. This was driven by a wider investment income surplus, while goods and services deficits slightly increased. Foreign investors showed strong interest in Canadian bonds amid record divestment from equities and money market instruments.