Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday July 9, 2020
Highlights of Bill Morneau’s 2020 fiscal ‘snapshot’
Finance Minister Bill Morneau has delivered an update on federal spending and economic projections linked to the government’s response to the COVID-19 pandemic.
Morneau is calling today’s statement an “economic and fiscal snapshot” rather than the traditional economic and fiscal statement that comes between budgets.
Morneau was forced to put off his spring budget in March after the devastating economic effects of the pandemic became clearer.
The deficit for 2020-21 is expected to rise to $343.2 billion from the $34.4 billion deficit projected before the pandemic.
A big chunk of that additional deficit can be attributed to the $212 billion in direct support measures the federal government is providing to individuals and businesses.
The snapshot says that, aside from the pandemic program spending, the economic slowdown is estimated to have added another $81.3 billion to the deficit in 2020-21.
The Canadian economy is projected to shrink by 6.8 per cent this year before bouncing back by 5.5 per cent next year, making this crisis the worst economic contraction since the Great Depression. The economy is expected to decline in 2020-21 more than twice as much as it did in 2009-10 in response to the global financial crisis.
Due to the the financial supports provided by the federal government, the federal debt-to-GDP ratio is expected to rise from 31 per cent in 2019-20 to 49 per cent in 2020-21.
The federal government says it’s getting a better deal on that debt through very low interest rates. “As a consequence of these developments, the government will save over $4 billion in public debt charges in 2020-21 compared to the forecast presented in the 2019 Economic and Fiscal Update in December 2019,” the snapshot said.
Between February and April, 5.5 million Canadians either lost their jobs or saw their work hours significantly reduced. Those losses pushed the unemployment rate to 13.7 per cent in May — the highest rise on record — from a pre-crisis low of 5.5 per cent in January.
Finance Minister Bill Morneau said that without government pandemic programs, the GDP would have contracted by more than 10 per cent and unemployment would have risen by another 2 per cent. (CBC)