OTTAWA (AP) — The Canadian government is predicting a historic USD254 billion deficit for 2020-21 resulting from its economic and stimulus plans to battle COVID-19.
The amount, included in a fiscal “snapshot” the Liberal government released on Wednesday, is a huge jump from the USD20.8 billion deficit projected prior to the pandemic.
The report said since March, the federal government spent more than USD171 billion on health and safety measures as well as direct aid to Canadians and businesses.
Prime Minister Justin Trudeau defended the government’s spending as a lifeline to Canadians battling to stay afloat. “We decided to take on that debt to prevent Canadians from having to do it,” he told a news conference. “I know there are people out there who said we should have done less. I think that’s wrong. Now is the time for the federal government to step up and help Canadians during a historical crisis.”
The national debt is projected to climb to USD89 billion while the economy is expected to shrink by 6.8 per cent.
An estimated 5.5 million Canadians either lost their jobs or have seen their hours reduced.
The debt-to-GDP ratio is expected to rise from 31 per cent to 49 per cent because of the emergency spending. The government expects unemployment to hit 9.8 per cent this year then fall to 7.8 per cent next year. Unemployment was at a record low of 5.5 per cent in January.
One of the federal benefits is the Canada Emergency Response Benefit which paid USD1,481 a month to Canadians earning less than USD740 per month because of the economic shutdown. The programme paid out USD39.6 billion in benefits to about eight million Canadians as of late June.
Finance Minister Bill Morneau said without government action families would have been buried in debt. “Every investment we made was in response to COVID-19,” he said. “We worked to make sure our programmes left no one behind.”
Trudeau said historically low interest rates will make borrowing costs manageable and allow the government to continue to invest in the economy.