Today, Canada’s Finance Minister Bill Morneau provided the federal fiscal snapshot. It was forecasted that the deficit is estimated at $343.2 billion as a result of reduced revenues due to the economic shut down and additional, unexpected stimulus spending to support residents and businesses. This snapshot is based on a private sector forecast and alternative scenarios were presented.
Highlights of the snapshot include:
· Deficit: $343.2 billion
· Debt: $1.2 trillion
· Debt to GDP: 30.1% last year, which was very good compared to other G7; now at 49%
· Debt management plan: Lock in as much of the debt at a low rate for as long as it can. Higher percentage of government bonds for a long period of time, keeping cost servicing (interest paid per year) lower.
The Federal Government will not increase taxes. They also indicated there will be a $14 billion safe re-start agreement with Provinces and Territories to ensure a safe, sufficient supply of childcare, and to build capacity to test and trace COVID-19.
Aside from the pandemic program spending, the economic slowdown is estimated to have added another $81.3 billion to the deficit in 2020-21. The Canadian economy is projected to shrink by 6.8% this year before bouncing back by 5.5 % next year, assuming the pandemic crisis does not become worse again. This could be the worst economic contraction since the Great Depression.
“Many jobs are not returning especially for tourism/hospitality, retail, restaurants, and other small businesses. It is time to pivot and commit to infrastructure (transportation, energy, resources) and workforce investments collaborating with educational institutions across Canada to instigate economic activity,” said Anita Huberman, CEO of the Surrey Board of Trade. “Many industries such as manufacturing, technology, and healthcare have indicated a skills gap for years. It is time for structured, sustainable, and ongoing investments into upskilling and reskilling.”
A focus on growth, resilience, and opportunity for those affected and building a green economy was mentioned by Minister Morneau.
“When examining the overall debt to GDP ratio, we are on par or better off than many other countries affected by the pandemic. Though the Federal Government has been doing a phenomenal job protecting and providing for Canadians, there needs to be a path forward towards reviving Canada’s economy.”