Parliament’s budget watchdog says it is likely the federal deficit for the year will reach $ 252.1 billion as a result of the COVID-19 pandemic, and could even increase if measures are taken. emergencies stay in place longer than expected.
The figure is an estimate based on the nearly $ 146 billion in spending measures the government has announced to help cushion the economic blow of the pandemic, estimated declines in the country’s gross domestic product and the oil price remaining well below previous expectations.
The report of the Parliamentary Budget Officer, Yves Giroux, assumes that real GDP will contract by 12% this year and will help bring the ratio of federal debt to GDP to 48.4%.
“To date, the budget measures announced by the government are supposed to be temporary. Once the budgetary measures have expired and the economic recovery has ended, the federal debt-to-GDP ratio should stabilize, “said Giroux in a press release.
“But if some of the measures are extended or made permanent, the federal debt ratio will continue to rise. “
He also warns again that additional spending may be required if the situation persists longer than expected or if the economy lags behind when the restrictions are lifted.
Its report indicates that the estimates are a possible scenario if the current public health measures remain or are lifted slowly, but not entirely, for the rest of the calendar year.
The Liberals said they would spend what was necessary to bridge the gap between business and workers during the crisis. Prime Minister Justin Trudeau would not speculate on Thursday how the government would handle the massive deficit once the economy rebounds.
“There will be time after all this is done while we find out exactly how it is going, where we will have to make the next decisions on the appearance of this recovery,” he said at a conference. press on Parliament Hill, “but for now our goal is to get through this together as a country. “
Restrictions that were put in place across the country in March forced non-core businesses to close their storefronts, sending many workers who could work from home. Others have been laid off or their hours reduced.
To date, more than seven million people have received federal emergency assistance through the Canada Emergency Response Benefit, which has paid out more than $ 25.6 billion in benefits, according to the latest federal figures. .
The Liberals have budgeted $ 35 billion for CERB, which pays $ 2,000 a month for up to 16 weeks to anyone whose income has fallen below $ 1,000 a month. The Giroux report estimates that the measures will end up costing the government $ 35.5 billion.
A more detailed note explaining the figure, released separately this morning, estimates that CERB will reach 8.5 million people.
But the note warns that the estimates are “very sensitive” to the economy in the coming months, as well as to the spread of COVID-19. Part of the spending will also be based on the program’s interaction with a new wage subsidy program that will begin payments next week.
Giroux also estimates that the wage subsidy program will cost $ 76 billion, slightly more than the price of $ 73 billion that the Liberals imposed on the measure.
The grant will cover 75% of employee salaries, up to $ 847 per week for 12 weeks, retroactive to mid-March and to the beginning of June.
In a cost note specific to the grant, the PBO indicates that the cost of the program will depend somewhat on the behavioral response of employers.
This report from The Canadian Press was first published on April 30, 2020.