Ottawa’s finances are improving as revenues climb and spending eases now that pandemic aid programs have ended, federal public accounts show.

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Ottawa's finances are in better shape than expected — but don't get used to it, say economists Back to video

The federal deficit for the 2021-22 fiscal year was $23.6 billion lower than that projected in the spring budget. The deficit was $90.2 billion, while the budget projected it would come in at $113.8 billion.

Revenues climbed by $96.8 billion, or 30.6 per cent from 2021.

However, Desjardins warns that “the risks to the federal fiscal outlook are tilted toward larger, not smaller, deficits.”

Its economists expect a recession next year and its forecast for GDP growth in 2023 is weaker than the federal government’s and its forecast for unemployment higher.

“An overtightening by the Bank of Canada could lead to a more severe recession than we currently expect, pulling down revenues while boosting spending in the process,” wrote Randall Bartlett, Desjardins’ senior director of Canadian economics, in a report.

The government of Canada’s borrowing costs are also set to rise sharply as central banks continue to raise interest rates to fight inflation.

Additional reporting by Canadian Press