National Post (Latest Edition)

Deficit to hit $328.5 bil­lion with COVID mea­sures

- Jor­dan Press Business · Finance · Infectious Diseases · Health Conditions · Ottawa · Taxes

OT­TAWA • The par­lia­men­tary bud­get of­fice says the fed­eral deficit for the year is on track to hit $ 328.5 bil­lion as a re­sult of COVID-19.

That fig­ure re­leased Tues­day re­flects mea­sures an­nounced as of the start of the month, in­clud­ing an es­ti­mated $ 225.9 bil­lion in emer­gency aid in re­sponse to the pan­demic.

Rel­a­tive to the size of the econ­omy, the deficit amounts to 15 per cent of gross do­mes­tic prod­uct, mak­ing it the largest over 50-plus years of com­pa­ra­ble data.

The Lib­er­als said in July that the deficit would be $ 343.2 bil­lion, but that didn’t in­clude new pos­si­ble spend­ing, or mea­sures com­ing in un­der bud­get.

Much of the spend­ing is ex­pected to be tem­po­rary, as the govern­ment tries to put a fi­nan­cial floor un­der house­holds and busi­nesses feel­ing eco­nomic pres­sure from the pan­demic. Bud­get of­fi­cer Yves Giroux says in his re­port that the bud­get deficit will fall to about $ 73.8 bil­lion next year and con­tinue to fall in en­su­ing fis­cal years.

But in a nod to how dra­mat­i­cally the govern­ment’s fis­cal po­si­tion has changed, his re­port es­ti­mates deficits roughly $ 40 bil­lion larger each year, on av­er­age, com­pared to the out­look the of­fice pro­vided pre-pan­demic.

The re­port paints one pos­si­ble pic­ture of the path fed­eral spend­ing will take in the com­ing months, en­vi­sion­ing a world where pan­demic- re­lated re­stric­tions stay in place for the next 12 to 18 months while a vac­cine is de­vel­oped and then widely dis­trib­uted.

Giroux says there is much that could throw off this base­line sce­nario for par­lia­men­tar­i­ans to fol­low, such as the tim­ing of a vac­cine, an ex­ten­sion of any pan­demic- re­lated aid, changes to in­ter­est rates, or the cre­ation of new pro­grams.

For in­stance, should the govern­ment debt- fi­nance some or all of the pro­posed mea­sures in its re­cent throne speech, the medi­umterm out­look for fed­eral fi­nances could change dra­mat­i­cally.

Over­all, things are more likely to be worse than they are likely to be bet­ter in the sce­nario Giroux lays out.

He says fed­eral fi­nances are sus­tain­able, “but barely,” not­ing it wouldn’t take much in terms of new spend­ing or tax cuts for the fed­eral debt to be­come un­sus­tain­able.

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