August 18, 2010
Economic Snapshot
Infrastructure Stimulus Fund: Better late than never
JOHN CLINKARD
consulting economist, CanaData
It has been a challenge to assess the impact on the economy of the Infrastructure Stimulus Fund (ISF), introduced by the federal government in the 2009 budget.
A recent report by the Office of the Parliamentary Budget Officer (PBO) goes some distance toward explaining why this assessment has proved so difficult.
According to the PBO, although all of the $4 billion in program spending has been allocated, there have been noticeable delays in starting and completing projects compared to what was originally indicated when ISF was announced.
In light of these delays, the PBO says there is a significant risk that some of the announced projects will not be completed by the March 31, 2011 deadline, as required by the federal government. This is cause for those projects to lose federal funding.
In order to help determine the potential outcomes for the ISF program, the PBO developed a forecasting model that identified a “best” outcome, with all projects completed on time; a “baseline” outcome, with 7.3% of the projects not completed on time; and a “worst” case scenario, with 12.5% of the projects not completed by March 31, 2011.
It is worth noting that some of the information relating to the status of various projects in the ISF program provided by Infrastructure Canada contained inconsistencies.
And the analysis was further complicated by the fact that a significant percentage (26%) of projects did not submit progress reports.
Despite these date reporting issues, however, the observations made by the PBO tend to reinforce one of the major problems with government fiscal stimulus programs. Specifically, they highlight the difficulty in providing stimulus in a timely manner.
Given the signs that the anemic U.S. recovery may not give as much support to Canada’s export sector as it has in previous upturns, however, the delayed impact of the Canadian stimulus fund, provided it is not allowed to lapse for approved projects, should give a boost to growth late in 2010 and possibly during the first half of 2011, partly by offsetting the subpar growth of exports.
John Clinkard has over 30 years’ experience as an economist in international, national and regional research and analysis with leading financial institutions and media outlets in Canada.
Data source: Parliamentary Budget Officer-Infrastructure Canada
Chart: Reed Construction Data – CanaData.
