CANADA – Finance Minister Chrystia Freeland tabled the federal government’s economic statement in the House of Commons, November 27. The government is preparing to spend up to $100 billion to jumpstart the post-pandemic economy while at the same time projecting a $381.6 billion deficit for the 2020-2021 fiscal year.
“We will do whatever it takes to help Canadians through this crisis. We will invest in every necessary public health measure. We will support Canadians and Canadian businesses in a way that is targeted and effective. And we will ensure the Canadian economy that emerges from this pandemic is greener, more inclusive, more innovative, and more competitive than the one that preceded it, with a stronger, more resilient middle class,” said Freeland, noting Canada is facing a “recession like no other.”
“As we have learned from previous recessions, the risk of providing too little support now outweighs that of providing too much. We will not repeat the mistakes of the years following the Great Recession of 2008,” she added.
Freeland said the federal government has invested on many fronts to fight
the COVID pandemic; $322 billion so far in direct measures and $85 billion
in tax and duty deferrals.
“This is the largest economic relief package for our country since the Second World War,” she said.
To date, Canada has recovered almost 80% of the more than 3
million jobs lost at the outset of the pandemic. The Canada Emergency Wage Subsidy has protected more than 3.9 million Canadian jobs.
Once the virus is under control, the government plans to deploy a short-term stimulus package, spending roughly 3-4% of gross domestic product (GDP) over three years, or between $70 and $100 billion, to make time-limited investments intended to build Canada out of the recession. The government expects financial support will be needed “deep into 2021” in order to protect jobs and prevent permanent economy losses.
“When the economy has recovered, the time-limited stimulus will be withdrawn and Canada will resume [a] prudent and responsible fiscal path, based on a long-term fiscal anchor, which we will outline when the economy is more stable,” said Freeland.
In the meantime, the government is making a “down-payment” on the growth plan by investing in measures like: laying the groundwork for a Canada-wide Early Learning and Child Care System; programs to support the economy’s green transformation; investments in COVID testing and tracing; procurement of PPE and $150 million to improve ventilation in public buildings; creating the Highly Affected Sectors Credit Availability Program for Canada’s hardest-hit industries; establishing a new $1 billion Safe Long-term Care Fund that will help protect seniors and the most vulnerable; and providing up to $1,200 in 2021 for each child under the age of six for families entitled to the Canada Child Benefit.
The government is also increasing the maximum rate of the Canada Emergency Wage Subsidy to 75% from December 20 until March 13, 2021, and extending the Canada Emergency Rent Subsidy and Lockdown Support until March 13, 2021 (all programs in effect until June 2021).
The deficit is expected to fall significantly over the next two fiscal years, to $121.2 billion in 2021-22 and to $50.7 billion in 2022-23 as the economy recovers and the need for temporary measures wanes. In 2025-26, the deficit is expected to fall to $24.9 billion or 0.9% of GDP.
This deficit is warranted, said Pontiac MP William Amos. “This crisis demands targeted, time-limited support to keep people and businesses afloat and to build our way out of the COVID-19 recession. We are taking on debt so Canadian households and families don’t have to, preventing households from going bankrupt, and businesses from permanently shutting their doors,” he said.
According to Amos, Canada entered the pandemic with the strongest fiscal position of any G7 country and still retains that position. “At the same time, the COVID-19 debt is affordable, with debt-servicing costs and borrowing rates at a 100-year low, which we are locking in over the long-term,” he added.