The Conference Board of Canada says the federal budget will have a significant impact on the capital's economy, likely contributing to slower spending.
"The public administration sector in Ottawa accounts for about 25 per cent of total economic activity. As well, one in five workers in Ottawa are employees of the federal government," said economist Alan Arcand.
"Therefore, limiting growth or having no growth in that sector will have a big impact on the bottom line."
Although Arcand predicts Ottawa's economy will take a significant hit, he says the impact won't be felt until later this year, and into 2011.
"We will see much slower growth going forward. It's not just in the public administration sector, but given that these people spend a lot of money in the economy, we should look to see slower retail spending; the hot housing market, we'll probably see that cool down as well. It will have a fairly deep impact."
The budget tabled Thursday aims to clamp down on spending in the public service. The government will freeze departmental operating budgets for the next three years, putting limits on employee salaries.
The government says the cuts to the public sector could save nearly $7 billion over a five-year period. Finance Minister Jim Flaherty plans to cut the deficit from $54 billion to less than $2 billion within that same time frame.
With files from The Canadian Press
