OTTAWA (NEWS 1130) – It’s a grim outlook when it comes to just what emergency measures brought in to help Canadians weather the COVID-19 crisis could cost taxpayers.
The Parliamentary Budget Officer has released his latest analysis of the fallout from the coronavirus pandemic and oil price shocks. In it, the PBO says, based upon the updated economic scenario and announced federal measures, the budget deficit would increase to almost $25-billion in the current fiscal year and then skyrocket to $252-billion in 2020-2021.
“Relative to the size of the Canadian economy, the deficit would be 1.1 per cent of GDP in 2019-20 and 12.7 per cent of GDP in 2020-21,” Yves Giroux’s analysis reads. “As a share of the economy, the budget deficit in 2020-21 would be the largest budgetary deficit on record.”
– For 2020, real GDP growth is assumed to be -12.0 per cent (weakest on record)
– The budget deficit could increase to $24.9 billion in 2019-20 and then to $252.1 billion in 2020-21 (largest on record) based on economic scenario & federal aid spending @NEWS1130 https://t.co/dVeTgnhxhN
— Monika Gul (@MonikaGul) April 30, 2020
So far, $146-billion in spending has been announced by the federal government to help Canadians stay afloat during the pandemic. More fiscal measures may be required to support the economy in the coming months, the analysis adds.
“Moreover, after support measures are provided, fiscal stimulus measures may be required to ensure that the economy reaches lift‑off speed, especially if consumer and business behaviour does not quickly revert back to ‘normal’ conditions,” the PBO analysis adds.
As the health crisis continues, Giroux says Canada’s economy could see further deficits and job losses.
The PBO stresses the scenario analysis “is not a forecast of the most likely outcome,” but is rather an “illustrative scenario of one possible outcome.” He notes that prior to the pandemic and oil price shocks, the federal “government’s balance sheet was healthy.”
He adds, “Given the temporary nature of budgetary measures, credit market access at historically low rates, and looking to historical experience, indicate that the Government could undertake additional borrowing if required.”
However, Giroux says the debt ratio could keep rising if some of the emergency measures are extended or made permanent.
According to the analysis, once the economy recovers, the debt-to-GDP ratio should stabilize.