Finance Minister Bill Morneau recent tabled the federal government’s Economic and Fiscal Snapshot 2020. The snapshot highlights spending and economic projections linked to Canada’s COVID-19 Economic Response Plan.
With this year’s budget delayed indefinitely due to the pandemic, this is the most detailed economic update this year.
The snapshot projects a massive increase in the federal deficit, a significant decline in GDP and a jump in the federal debt-to-GDP ratio.
The Liberal government is projecting a deficit of $343 billion this year, the largest deficit in Canadian history. For the first time, the net federal debt will climb over $1 trillion.
Compared to earlier this year, federal government revenues are expected to be down by $71.1 billion and spending up by $236 billion. The debt-to-GDP ratio is projected to jump this year from 31 to 49 per cent, and Canada’s economy is expected to contract 6.8 per cent.
This year’s emergency spending and resulting deficit were necessary to help Canadians through this pandemic. However, the Liberal government had weakened Canada’s fiscal position before the pandemic by racking up $87 billion in deficits — at a time when the economy was booming and the government should have been saving.
As a result, the federal government has a lot less room to manoeuvre post-pandemic before Canada hits the fiscal wall, like what happened in 1995.
That is why Canada’s debt was recently downgraded by Fitch Ratings and Canada lost its AAA credit rating.
In addition, the snapshot did not provide any recovery plan — something that is needed immediately to address the millions of Canadians who are unemployed and whose emergency benefits run out this fall.
Parliament is shut down until Sept. 21, providing no opportunity for MPs to raise these concerns in the House of Commons. The Liberal government needs to reopen Parliament in order to ensure better accountability for the billions of dollars being spent without parliamentary approval or oversight, and to ensure that pressure is put on the government to provide a road map for recovery. Canadian lives and livelihoods are depending on it.