RBC Sees More Red Ink in Canada's Budget 2025, Warns Fiscal Rules Will Be Tested

06:13 AM EDT, 10/28/2025 (MT Newswires) -- The Canadian federal government's Budget 2025 will see more red ink when it's presented next Tuesday, said RBC.

The bank estimates $70 billion this year, five-year deficits averaging 1.5% of gross domestic product and debt-to-GDP moving mostly sideways before fiscal pressures. What's less clear, but more important, is how this matters for Canada's economic and fiscal health.

A pro-growth fiscal policy is needed to address localized weakness and the risk of frozen business investment, stated RBC.

If successful, such a policy could be self-financing in the long term, leaving public finances unscathed, pointed out the bank. But with uncertainty and a timing mismatch between spending and presumed growth dividends, deficits and debt will be under pressure.

This setup is a challenge for fiscal rules, which operate over a typical five-year budget cycle. The prior government's fiscal anchor -- a declining debt-to-GDP ratio -- wouldn't be met under RBC's baseline.

A fiscal program solving for long-term growth in an uncertain economy requires a new set of rules and a multidimensional approach, both quantitative and qualitative, added the bank.

Above all, Budget 2025 will be about establishing credibility in both the growth strategy and fiscal management.

RBC doesn't expect it to give the bank a final read on either.

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