Deficit to hit $184B, firms decry delay in rollout

WAGE-SUBSIDY PLAN

OTTAWA • The 2021 federal deficit is now expected to reach $184 billion, or 8.5 per cent of GDP, as Ottawa unveils new spending measures to combat the economic fallout from COVID-19.

The latest projection, posted Thursday by the Parliamentary Budget Officer, is more than triple the previous deficit record set by former prime minister Stephen Harper, who ran a $56-billion gap in 2009 to fend off recession.

The updated forecast comes after Ottawa unveiled plans for a $73-billion wage-subsidy program for Canadian businesses, which continued to face criticism for its delayed rollout.

The ballooning budget shortfall will nudge the federal debt-to-GDP ratio above 40 per cent, according to the PBO, the highest in 20 years. That figure remains below the record 66.6 per cent in 1996, which led to several years of fiscal austerity.

Before the pandemic, Canada’s net debt-to-GDP ratio was around 30 per cent, and the Trudeau Liberals claimed they’d drive that down to prove fiscal prudence.

Meanwhile, business groups criticized Ottawa for delays in rolling out the wage-subsidy program, as Statistics Canada posted an unemployment rate of 7.8 per cent in March, after 1.01 million people lost their jobs. The program is one of two key spending measures announced by Finance Minister Bill Morneau in an attempt to reduce the economic pain caused by COVID-19. Direct spending measures proposed in recent weeks total $107 billion.

Businesses have expressed confusion over whether they are eligible for the subsidy, given a requirement that they must prove they have lost a certain amount of revenue over the past year.

In addition, an online portal where companies can apply is expected to take three to six weeks to complete, meaning thousands of companies will likely be forced to lay off personnel before the program is operational.

Dan Kelly, head of the Canadian Federation of Independent Business, told the House of Commons finance committee that his organization is getting about 800 calls per day, up from about 50 previously, as firms struggle to grasp the eligibility requirements.

According to a survey of its members, who represent about 110,000 companies, CFIB found that 80 per cent of small business are shuttered as the economy remains in lockdown. Thirty per cent of respondents will be unable to pay their April bills, and 39 per cent are contemplating permanent closure, according to the survey.

The wage subsidy was touted as a necessary measure by business groups and economists, who have argued that the Canadian economy is likely to see a hastier rebound if more Canadians remain employed, rather than get re-hired after social-distancing controls are lifted.