COVID-19 pandemic pushes federal deficit projection to record $343B


Canadian Prime Minister Justin Trudeau said that he was concerned about reports that the USA was considering reimposing tariffs on Canadian aluminium and possibly steel.

"If the federal government hadn't taken on significant debt in order to send money to Canadians, to support businesses and households, what would Canadians have done?"

At the time, Canada's debt-to-GDP was at about 66% - the highest in the G7 - and interest rates were high.

Perrin Beatty, president of the Canadian Chamber of Commerce, noted the deficit and the debt-to-GDP ratio of 49.1 per cent "will undermine Canada's fiscal capacity for decades".

It has already paid out about $80bn in individual emergency economic relief, and intends to spend a total of $82.3bn on the wage subsidy programme in the coming year.

We could soon learn what the true economic impact of the COVID-19 pandemic is on our country.

Canadian Chamber of Commerce's president and CEO, Perrin Beatty, said the deficit and added debt, which is worth almost half the country's GDP, will "undermine Canada's fiscal capacity for decades".

The Canadian Federation of Independent Business (CFIB) called the snapshot a missed opportunity to provide certainty for small business owners.

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"We were able to control the virus better than many of our allies, particularly including our neighbour", Trudeau told a briefing, saying Canada's success would help efforts to restart the economy.

The Liberals expect more workers to move onto the wage subsidy and off the CERB as that program winds down.

Although that's an improvement from the record-high unemployment rate of 13.7 per cent in May for a labour force of just over 19 million, it is still much worse than the record low of 5.5 per cent pre-pandemic.

Conservative leader Andrew Scheer, the leader of the opposition, called it a dire picture.

"Our government was well-positioned to be there for Canadians and lay the groundwork for our economy to bounce back". The expected unemployment rate at the end of 2020 is expected to be 9.8 per cent.

Canada - with a population one-tenth the size of the USA - has so far recorded 8,711 deaths and 106,167 positive cases and Trudeau said the situation was stabilising, although some hot spots remained.

"They need assurance that the government is focused on recovery and will be swift in enacting measures that will support them".

Sheila Block, a senior economist with the Canadian Centre for Policy Alternatives, said the uncertainty about the course ahead suggested the need to maintain or even increase spending: "Now is not the time for rash spending cuts and a turn to austerity".