Latest Developments in the Canadian Economic Accounts
Provisional estimates of the Canadian Government Finance Statistics: financial flows and balance sheet
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Provisional estimates of the Canadian Government Finance Statistics (CGFS) for financial flows and the balance sheet of the general government and government business enterprises are now available for the period 2007 to 2012. This release, the last of a series of three, follows the two previous releases in November 2014 on the statement of operations and functional expenses for all components of general government, as well as federal and provincial and territorial government business enterprises.
The data sources, methods and concepts that underlie the CGFS-based data depart significantly from the Financial Management System (FMS)-based data previously published by Statistics Canada.
Given the magnitude of these differences, Statistics Canada has decided to release the data with the provisional qualifier. This qualifier signals to users that although the data are fit for use, they are subject to revisions. Over the current year these data will be integrated into the rest of the Canadian System of Macroeconomic Accounts (the national accounts, balance of payments, international investment position, input-output tables) resulting in revisions as data, concepts and methods are reconciled and aligned within the national accounts framework.
The data will retain their provisional status until a number of improvements are implemented over the current year. These improvements include balancing grants across levels of government, adding capital expenditures and capital stock as well as consolidation of inter-sector transactions and stock positions.
While some of the detailed series will be revised over the current year and some data gaps will remain, the general story and trends found in the current data will remain similar.
Note to readers
Consolidated government data of all levels of government will be available with the November 2015 Canadian Government Finance Statistics release.
Data corresponds to the end of the fiscal year closest to December 31. For example, data for the federal government fiscal year ending on March 31, 2010, (fiscal year 2009/2010), are reported in reference year 2009.
The initial compilation of the Canadian Government Finance Statistics was a complex undertaking including structural, presentational, conceptual and statistical changes. Regular users of Statistics Canada’s data are urged to familiarize themselves with these changes.
Government Finance Statistics
Government Finance Statistics can be used to study the financial position, liquidity and operations of the different levels of governments in a consistent and systematic manner. Public accounts information cannot be used for this purpose because the data, while compiled according to Public Sector Account Board standards, can be reported differently from one jurisdiction to another and are therefore difficult to compare.
Countries around the world are aligning or have already aligned their government finance statistics to the international standard which was developed by the International Monetary Fund. Canada now joins Australia as one of the very few countries to compile Government Finance Statistics directly from government accounting records, providing users with higher quality statistics and far greater detail.
Net financial worth
Net financial worth is among the most important analytic measures in the CGFS framework. Net financial worth is defined as the total value of financial assets minus the total value of outstanding liabilities. When financial assets are greater than liabilities the measure is referred to as net financial assets. When liabilities are greater than financial assets the measure is referred to as net liabilities.
This measure can be used to assess the sustainability of public finances. A large net liability position can restrict a government’s ability to provide goods and services to households and support economic growth.
In 2007, before the start of the 2008 global financial crisis, the net liabilities of all government sectors were $580 billion. Five years later, in 2012, it reached $874 billion, a 50.7% increase. Although the federal government accounts for the largest proportion of the net liabilities, that proportion steadily declined from 2007 to 2012. Conversely, the net liabilities of the provincial and territorial governments grew steadily during the same period.
After declining 15.7% between 2007 and 2008, the net financial assets of the Canada and Quebec Pension Plans (CPP and QPP) rebounded 67.9% between 2008 and 2012 to reach over $228 billion. The Canada and Quebec Pension Plans and universities and colleges were the only government sectors to record a net financial asset position over this period.
The per capita net liabilities of all government sectors reached $24,955 in 2012, an increase of 42.6% from 2007 when it stood at $17,503. The year-over-year net liabilities growth in 2012 was -0.3%, down significantly from the growth rates recorded between 2008 and 2011. This phenomenon can be explained by stronger economic growth, reduced federal, provincial and territorial government deficits and a reduced growth rate of debt.
Theoretically, this $24,955 per capita liability would remain if governments liquidated all their financial assets, including the net assets held in government business enterprises, in order to reimburse creditors and meet other obligations such as pension plan liabilities.
In response to the 2008 global financial crisis, the federal government supported the mortgage loans market and several key Canadian economic sectors by introducing the Economic Action Plan. A significant increase in budget expenditures combined with a reduction in revenues led to large deficits for the federal government, which they financed by issuing debt securities on the market.
Net liabilities as a percentage of GDP stood at 30.9% in 2008 but grew rapidly in 2009 to reach 34.3%. This was mainly attributable to a combination of declining GDP and large deficits which fueled increases in debt. Despite strong economic growth in 2010 and 2011, the net liabilities grew steadily, peaking at 35.7% in 2011. However, in 2012, the ratio fell slightly to 35.2% as federal government net liabilities grew at a slower pace than GDP.
Between 2007 and 2012, the federal government’s net liabilities grew by $149 billion, reaching a total of $649 billion. This increase was outpaced by growth in provincial and territorial government’s net liabilities, which rose $200 billion. By 2012 provincial and territorial government’s net liabilities stood at $428 billion.
|Province or territory||2007||2008||2009||2010||2011||2012|
|Newfoundland and Labrador||13,505||11,531||10,497||9,577||8,660||9,175|
|Prince Edward Island||9,593||9,632||10,642||10,824||12,554||12,910|
One way to compare provincial and territorial financial position is to look at net liabilities on a per capita basis. The net liabilities per capita picture for provincial and territorial governments changes significantly after the 2008 global financial crisis. Between 2007 and 2012, the net liabilities per capita for all provincial and territorial governments grew by 77.3%.
In 2007, the highest net liability position per capita among provincial and territorial governments was recorded by Newfoundland and Labrador at $13,505, followed by Quebec at $11,992. In 2012, the net liability position per capita of Newfoundland and Labrador ranked seventh, at $9,175 dollars, a 32.1% decline compared to 2007. Between 2008 and 2010, Quebec recorded the highest net liability position per capita. In 2011 and 2012, Ontario posted the highest net liability position per capita, rising from $9,849 in 2007 to $17,734 in 2012, an increase of 80.1%.
The net liability position per capita expanded by 34.6% and 54.7% in Prince Edward Island and New Brunswick respectively, between 2007 and 2012. In Nova Scotia, the growth stood at only 13.5%. Manitoba recorded the fifth highest net liability position per capita among provinces and territories in Canada in 2012, posting a 48.7% increase compared to 2007. The net liability position per capita declined by $792 in Saskatchewan over the same period, a decline of 17.7%.
In 2007, Alberta recorded a net financial asset position of $11,134 per capita. Nonetheless, in 2012, the net financial asset position per capita was $5,874, a decrease of 47.2% or $5,260 per capita. A large increase in debt securities liability was one of the main contributors to the change over this period. British Columbia recorded the eight highest net liability position per capita in Canada in 2012, at $5,581, 139.5% higher compared to 2007, the largest increase in percentage among all provinces over the period.
Finally, the three territories posted a net financial asset position per capita in 2012, with Yukon recording the highest value at $13,436 dollars, followed closely by Nunavut at $11,654. The Northwest Territories’ net financial assets position declined by 82.2% between 2007 and 2012.
Financial assets and liabilities by type and source of financing for the public sector
The roles, responsibilities and powers of each level of government are reflected in the composition and evolution of their financial assets and liabilities.
The financial assets of the federal government and government business enterprises are mainly composed of loans, particularly to corporations.
There is preponderance in equity and investment fund shares and debt securities for the Canada and Quebec Pension Plans and for the provincial and territorial governments. In fact, these sectors of government manage important social security funds requiring the creation and administration of assets offering higher potential returns. Universities and colleges assets held in endowment funds are also, for the most part, invested in equity and investment fund shares and in debt securities.
The other accounts receivable constitute the largest financial asset for health, local government and school boards sectors.
Debt securities (treasury bills, other short-term paper and bonds) represent more than 70% of the total liabilities for the federal, provincial and territorial governments. In fact, debt securities are the main financing source of the federal, provincial and territorial and local government sectors, including the government business enterprises.
The liabilities of the other sectors represent, for the most part, funds received from other levels of government in the form of loans and other accounts payable. The health, universities and colleges and schools boards in particular have restricted borrowing capacity or power to issue debt securities directly on the market. The funds required to finance operations and capital investments mainly come from other levels of governments.
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