A rebounding global economy could see Canadian governments back in the black a lot earlier than forecast, finds a new report from CIBC World Markets Inc.

“Canadian governments are selling themselves short,” write CIBC economists Warren Lovely and Emanuella Enenajor. “With ample insulation against today’s still-tepid economic climate and prospects of a more forceful 2014/15 global expansion, federal and provincial governments will enjoy some important fiscal breathing room.”

The economists say that with the extra “wiggle room” some governments may accelerate their deficit reduction timelines, while others may increase spending.

While a weak global economy and debt conscious Canadian households have seen GDP disappoint, government budget targets are likely still well protected. Federal and provincial governments set aside $5 billion in explicit reserves/forecast allowances in 2013/14, enough to absorb at least a full percentage point miss on nominal growth.

The report adds that government bottom lines will also be helped by another year of low interest rates and resulting lower-than-planned debt service charges.

In addition, some high-profile headaches in the energy sector — transportation bottlenecks and a discount between Alberta and international crudes — have been less painful of late.

In addition, the economists forecast Canadian nominal gross domestic product growth reaching above five per cent in both 2014 and 2015.

They note that, all told, the combination of above-plan growth and budgetary prudence is equivalent to roughly $10 billion in federal-provincial fiscal cushioning for 2014/15 and an even greater $15 billion the year after.

“Add that to the insurance built into the current fiscal year and the cumulative leeway exceeds $30 billion.

That’s $30 billion in deficits that theoretically need not materialize, suggesting that in some cases, deficit elimination timelines could be accelerated.”

The report notes that Canada’s commodity rich regions will once again be the primary beneficiaries of accelerated global expansion.

A return to deficit reduction would further curb the government bond market, the report notes. By the time 2015/16 rolls around, combined federal-provincial net bond issuance — once so plentiful — could be virtually non-existent.

“The likelihood of better-than-expected fiscal results should ultimately defuse a lingering threat to select provincial credit ratings,” add the CIBC economists.

They note this will “result in an even scarcer supply of bonds, supporting Government of Canada yields and provincial credit spreads alike.”