COVID-19 Hits Economy to the Tune of a $343.2 Billion Deficit for 2020-21

PM Trudeau
Prime Minister Trudeau

OTTAWA – “The COVID-19 pandemic has had a major impact on the social and economic well-being of Canadians in every part of the country. For many, it has meant lost jobs, lost hours and lost wages. Our government has understood, from the moment this pandemic began, that it was our role to step in to support Canadians and stabilize the economy. Our investments have meant that Canadians and Canadian businesses, instead of drowning in debt and closing up shop, will be better positioned to get back at it. As economies gradually and safely reopen, we will continue to ensure that Canadians have access to the support they need,” states Bill Morneau, Minister of Finance.

As a direct result of the COVID-19 pandemic, the federal deficit is projected to hit $343.2 billion by the end of this fiscal year.

Spending levels are on a similar level to the spending during the Second World War. The deficit projection released Wednesday is up from the pre-pandemic economic update delivered in December 2019. At that time the deficit was forecast to be at about $28.1 billion in fiscal 2020-21.

Canada’s overall debt is slated to hit $1.2 trillion.

The Finance Minister presented an economic and fiscal snapshot in the House of Commons today. The Minister says that the federal government has used its strong fiscal position to stabilize the economy and support Canadians by putting in place the largest economic aid package in generations. While the toll of COVID-19 on the broader economy in 2020 is expected to be the largest and most sudden economic contraction since the Great Depression, measures to flatten the pandemic curve in Canada are paying off, and efforts are underway across the country to safely and gradually reopen the Canadian economy. The actions and investments of governments across Canada to date have helped us get this far. But the road towards recovery remains long and uncertain. Today, and in the months to come, our economic health will largely depend on our public health.

In a statement, the Government says, “Canada’s COVID-19 Economic Response Plan is ensuring Canadians have the support they need to put food on the table and keep a roof over their head. Representing nearly 14 per cent of Canada’s gross domestic product (GDP), the Plan includes more than $230 billion in measures to protect the health and safety of Canadians and provide direct support to Canadians, businesses and other employers, and up to $85 billion in tax and customs duty payment deferrals to meet liquidity needs of businesses and Canadian families.”

Andrew Scheer, Leader of Canada’s Conservatives and of the Official Opposition, states, “Today was an opportunity to reverse course and put Canadians first. Instead, Justin Trudeau once again put Liberals first. Today’s ‘snapshot’ makes it clear that Justin Trudeau has no plan to help Canadians get back to work or to restart our economy.”

“Under Justin Trudeau’s watch, Canada is falling behind,” adds Scheer. “We have the highest unemployment rate in the G7. We are the only G7 country to have lost its AAA credit rating. And we are the only G7 country without a recovery plan. Over the past five years, the Trudeau Liberals have completely abandoned their fiscal anchors. The debt-to-GDP ratio is rising, the deficit has exploded to $343.2 billion, and they have completely lost control over the federal debt which for the first time will reach over $1 trillion this year.”

The Liberal Government says however that with comparatively low levels of debt, the Government of Canada has the room to borrow and support the Canadian economy. In fact, even given Canada’s increased borrowing needs due to the COVID-19 response, public debt charges are expected to fall in 2020-21, as a result of historically low borrowing rates. Through responsible fiscal management, the government is building a bridge from an emergency to a safer place where we can build a more resilient economy for the future.

“The government will continue to ensure Canadians are supported through this crisis and stands ready to take additional actions to mitigate the impacts of the pandemic,” states the Finance Minister.

Scheer counters saying, “The Auditor General’s Office doesn’t have enough funding to review all of the government’s pandemic spending. She needs at least $10 million. Canadians deserve to know how the government is spending their tax dollars. But once again Justin Trudeau is letting them down. While refusing the Auditor General’s request, Trudeau found $15 million to increase Chrystia Freeland’s office budget. That is unacceptable and an insult to Canadians.

“Since the pandemic began, Conservatives have been putting forward constructive solutions to help Canadians,” adds the Conservative leader. “Our goal has been and continues to be, to help get workers and local businesses back on their feet as quickly as possible. We know that our economic recovery will be driven by Canadians’ hard work, innovation, and entrepreneurial spirit. In order to be competitive, we need to unleash the power of the private sector. Help Canadians get back to work. Support small businesses. Lower taxes, cut red tape and make Canada an attractive place to do business once again.”