OTTAWA – Federal government unveils new round of financial support to respond to second wave of COVID-19 pandemic in Canada, as latest projections show national deficit set to hit new high: at least $ 381.6 billion of dollars fiscal year.
The deficit is growing for several reasons: supports in the event of an ongoing pandemic, $ 25.1 billion in recently announced programs to cut hard-hit businesses over the coming months, and the first allocations to help rebuild the economy. once the urgent health crisis passes.
This federal deficit projection is considered Canada’s best-case scenario and is up from the forecast of $ 343.2 billion in July. However, if the pandemic situation continues to worsen and the country experiences extensive restrictions, the deficit could reach $ 388.8 billion in 2020-2021, or climb to $ 398.7 billion if restrictions are stepped up.
Entitled “Supporting Canadians and Fighting COVID-19,” the 237-page financial update offers the country a revised overview of the state of federal finances and the impact of the current COVID-19 pandemic on Canadians. economic outlook for Canada, but does not give any estimate of when, if ever, the government will balance its books.
Deputy Prime Minister and Minister of Finance Chrystia Freeland unveils the revised economic picture in the House of Commons.
Speaking to reporters at an embargoed press conference as part of a virtual “lock-up” on Monday afternoon, Freeland said that as the country is still in the middle of a second wave , the government’s priority remains to fight the virus and protect the health and safety of Canadians. .
She also said the unprecedented Liberal spending to date has helped stabilize the economy, which is why the government plans to continue this approach.
“Canada’s spending as described today is prudent, thoughtful and prudent. And what we understand is that the job we need to do right now is to make sure our economy isn’t branded, to be sure our economy isn’t hurt, so we can get out. of this roaring crisis, ”Freeland said. . “We believe that the best way for Canada to meet its credit obligations is to have a strong and growing economy, which is what this plan is all about.
NEW COVID-19 EXPENSES
The budget update shows that since March, the federal government has spent more than $ 322 billion, up from $ 231 billion in July, on direct assistance measures to help fight COVID-19 and protect Canadians during the pandemic so far. This includes more than $ 52 billion in support of coordinated federal, provincial and territorial action.
This includes a revamped Employment Insurance program and new sick leave and caregiver leave programs for those who must be absent from work due to COVID-19.
Monday’s economic update includes a series of new measures building on the federal government’s continued response, which includes a series of emergency aid programs, support for local community-based organizations on the front lines and the $ 19.9 billion secure reboot sent to provinces.
In an effort to respond to the ever-growing pandemic, the federal government has announced plans to spend more on COVID-19 testing, vaccines, support for self-isolation and the purchase of personal protective equipment , reduce the cost of face shields and face masks for Canadians. by eliminating sales taxes and improving ventilation in public buildings.
From an economic support perspective, the government is also announcing its intention to raise the maximum rate of the emergency wage subsidy to 75% as of the end of December at a cost of $ 14.7 billion and to extend the rate. current support offered by Canada Emergency Rent. Additional foreclosure grant and top-up offered to businesses forced to close, until at least March, at a cost of $ 2.1 billion.
Additionally, the federal Liberals will establish a $ 1 billion “Long-Term Care Safety Fund” to help provinces and territories better protect Canadian seniors as part of plans to set a national standard of care. care. This program will be subject to a detailed expenditure plan and allocated on an equal per capita basis, provided that the provinces and territories demonstrate that investments have been made. The money will help improve infection prevention and control in long-term care homes and hire additional staff, for example.
To help Canada’s hardest hit industries such as tourism, hospitality, arts, entertainment and regional air transport, the government is creating a new “Highly Affected Sectors Credit Availability Program” . This new flow will allow those in need to access 100% government guaranteed loans, with better terms for those who have lost income due to people staying at home to limit the spread. virus.
These new loans are offered in an amount of up to $ 1 million, for a term of up to ten years, with more details promised soon.
And the Liberals are moving forward imposing the Goods and Services Tax / Harmonized Sales Tax (GST / HST) on multinational digital giants like Netflix and Amazon, “to pay their fair share.”
Referring to the rise in e-commerce Canadians are leading and efforts to level the playing field with local physical retailers, the federal government seeks to generate billions in new revenue over the next five years by offering a number of changes to ensure that the GST / HST applies to all goods and services purchased in Canada from foreign companies. These changes will take effect on July 1, 2021.
STIMULATES, LONG-TERM PLANS
At best, the federal deficit could fall to $ 121.2 billion in 2021-22 and shrink significantly over the next two years. In a worst-case scenario with increased restrictions, the federal deficit will continue to decline in subsequent years, but would stand at $ 136.7 billion in 2021-22.
Based on the various federal deficit projections – depending on the severity of the pandemic in the coming months – the federal government has unveiled a new economic stimulus plan that it intends to implement over the next three years to stimulate the recovery of Canada.
Based on the state of the country’s finances at the time, the federal government says it will spend around three to four percent of GDP – $ 70 to $ 100 billion between 2021 and 2024 – to “jumpstart” the recovery. economic.
The economic update includes planned spending under this program billed as a ‘down payment’ on the plan – largely green recovery-focused initiatives, such as new funds for home improvement and planting. trees and removing systemic barriers that COVID-19 has exposed, such as homelessness and racism.
“We will spend the winter working with Canadians, leading up to Budget 2021, to plan and prepare our investments when the virus is under control. At that point, we’ll be ready to step up a gear. That is why we are now announcing the scope of the plan, ”the economic update reads.
One of the biggest actions announced as part of this long-term growth plan is the creation of a Canada-wide “early learning and child care system”.
Seen as one of many initiatives to respond to the “divestiture” – the economic impacts that women are disproportionately suffering amid the pandemic – the government is announcing its intention to move forward with this plan. child care in next year’s budget.
Initially, the Liberals are providing $ 20 million over five years, starting in 2021-22, to bring governments, experts and stakeholders together to craft this new national plan.
In addition, the Liberals are promising to provide up to $ 1,200 a year in additional assistance in 2021 for every child under the age of six through the Canada child benefit program.
KEY ECONOMIC FIGURES
The deficit projection released Monday in the federal government’s fall economic statement is just one of a series of recently updated numbers showing the impact of the pandemic on the Canadian economy.
The federal government continues to claim that Canada’s economic situation would have been much worse without the rapid introduction of massive aid measures.
That being said, the government says the federal debt will exceed $ 1.4 trillion by March 2021, compared to $ 1.2 trillion projected in the July financial report.
According to Statistics Canada’s latest update on the country’s unemployment rate, almost a quarter of those who are currently unemployed have been unemployed for at least six months. A total of 1.8 million Canadians were unemployed in October and the overall unemployment rate is 8.9%. https://www.ctvnews.ca/business/ranks-of-long-term-unemployed-swell-even-as-economy-added-84-000-jobs-in-october-1.5177522
Monday’s document shows that nearly 80% of the jobs lost at the start of this crisis have been recovered, but unemployment is not expected to return to pre-pandemic levels until summer 2022.
Freeland reaffirmed a position of his predecessor, Bill Morneau: that Canada’s debt-to-GDP ratio remains the lowest in the G7 and that debt will therefore be affordable to manage for the many years it will take to get closer to balance. . The Minister of Finance said that despite the huge deficit, Canada’s current debt service costs relative to the size of the Canadian economy are at their lowest in 100 years.
The federal government now predicts that its debt-to-GDP ratio will be 50.7% in 2020-21, compared to 49.1% forecast in the July snapshot.
Monday’s budget update is expected to be followed by a full federal budget sometime in 2021, following the cancellation of the 2020 budget slated for March 30 due to the COVID-19 pandemic.
All the proposed new measures will be voted on by MEPs in the coming weeks. The measures should be seen as a matter of confidence and if the opposition does not support them the Liberal minority government could fall.