Federal deficit to hit $250B
OTTAWA — The federal deficit is expected to reach $250 billion in 2021, the largest on record, as the Liberal government introduces massive new spending measures to combat the economic fallout from COVID-19.
An updated report on federal finances by the Parliamentary Budget Office estimates that the 2021 deficit will be roughly 12.7 per cent of Canadian GDP, the highest deficit relative to the economy since 1985, when it was at eight per cent.
The economy is expected to shrink by as much as 20 per cent in the second quarter of 2020, and by 12 per cent over the entire year — the weakest output since 1961.
Gloomy projections about the federal fiscal position come after Ottawa announced $145 billion in spending measures aimed at stabilizing the broader economy. Global economic growth has plunged to depths not seen in decades, as governments impose strict economic restrictions aimed at slowing the spread of the novel coronavirus.
Federal debt as a percentage of GDP could now reach 48 per cent in 2021, up from around 30 per cent over the last number of years.
The report by the PBO also increased slightly the expected cost for the Canada Emergency Wage Subsidy (CEWS), up to $75.9 billion. An earlier projection by Finance Canada estimated the cost at $73 billion.
Businesses can now apply for the CEWS online, which will cover as much as 75 per cent of payroll costs for businesses over a three-month period.
The projected cost for the Canada Emergency Response Benefit (CERB) was trimmed back slightly, from an initial government estimate of $40 billion down to $35.4 billion.
The CERB is an expanded employer insurance program that provides $2,000 per month to people who have lost their jobs due to COVID19.