With a deficit of gigantic 343,2 billion in 2020-2021, Canada is facing one of the most important challenges in its history, acknowledged on Wednesday the minister of Finance, Bill Morneau, presenting his economic update. But Ottawa aside for the moment any form of austerity, while the crisis of the COVID-19 continues.
These 343,2 billion deficit in 2020-2021 represent 10 times the deficit of last year, and more than $ 256 billion of the planned $ there are only three weeks by the parliamentary budget officer, Yves Giroux. Thus the debt will jump to 1200 billion by next march, compared with 765 billion in march 2020.
“In the Face of an unprecedented challenge, our government had two choices”, justified Justin Trudeau: “We could let the Canadians fend for themselves and hope that it all ends soon, or we could act quickly to help Canadians.”
As Quebec city, Ottawa hopes that the economic recovery and an eventual return to a balanced budget – is going through the growth of the economy, rather than by the budget cuts and tax increases.
“We must make investments for our growth,” said Bill Morneau. “We are going to invest, and not make cuts or changes in our tax system.”
But Ottawa provides few details, for the moment, on how this is going to be done.
Up to now, the federal aid amounted to $ 230 billion in direct financial support to Canadians and businesses, for example through the Provision of canadian emergency (PCU) and the wage subsidy. According to the ministry of Finance, this represents 91% of aid disbursed to combat the economic impacts of the COVID-19, against 9% for the provincial governments. Ottawa has also agreed to $ 85 billion in indirect aid.
“It is a contribution which accounts for 14% of GDP, this is an extraordinary situation, which was absolutely necessary [in the circumstances],” says Mr. Morneau.
It is necessary to go back to the Second world War to find a financial effort comparable.
What are the next steps ? Hard to say.
Bill Morneau is committed to presenting a “true” federal budget this fall, seven, or eight months after the cancellation of the budget 2020 because of the COVID. Beyond that, very little is known about the concrete measures that will be taken in the autumn, apart from the progressive end of the Delivery canadian emergency (PKU).
Mr. Morneau said he hopes that the wage subsidy and the employment insurance (ei) will take over from the PCU from September.
In other words, cheques of$ 2000 for most Canadians; the aid will mainly go through the company that employs them. Nearly one in four employees in the country currently reaches the wage subsidy offered to his employer, much less than what was envisaged in Ottawa to launch.
“We must first find a way to all get back to work. We are committed to make the necessary investments, this is what will help to improve our situation,” says Mr. Morneau.
According to the projections of Ottawa, the revenue budget 2020-2021 should be “considerably lower than those provided for” in the last year, because of the economic impact of the health crisis.
“The contraction of budget revenues federal is without precedent since the Great Depression; the anticipated decrease in 2020-2021 is more than double that which occurred in 2009-2010 in the wake of the global financial crisis”, demonstrates the ministry of Finance.
Economic overview and budget released Wednesday, projects a decline of 6.8% of GDP in 2020, and a rebound of 5.5% in 2020, compared to growth was a modest 1.6% and 1.8% projected last year. It is a difference of $ 231 billion for 2020, and 153 billion for 2021.
Mr. Trudeau and his minister of Finance have, however, repeated, again and again, that Canada is in a better position than many other countries in the G7, with a ratio of debt to GDP ratio “substantially lower than the other”.
“According to projections by the OECD, the debt levels of Canada will increase less than those of many other advanced economies, even in the event of a scenario that is more pessimistic, where there would be a resurgence of the virus.”
In return, Ottawa has been a lot more interventionist than other States.
Delivery canadian emergency (PKU) remains the most costly for Ottawa. Dated as of June 28, 8,16 million Canadians had made the request, which represents payments 53,53 billion.
The PCU for the students, it benefited 601 000 young people, representing more than 1.42 billion.