A “war effort” exception

Un «effort de guerre» d’exception

Photo: Sean Kilpatrick, The canadian Press
The Bank of Canada has purchased for some $ 200 billion of assets since mid-march, more than double the size of its asset in the balance sheet before the crisis, retained Oxford Economics.

The” war effort ” to monopolize funds, enormous, more in Canada on a relative basis. “In these times exceptional, we need outstanding action “, said Wednesday the director general of the international monetary Fund, Kristalina Georgieva.

If she has not had to do so during the financial crisis of 2008, the Bank of Canada borrowed, this time, the quantitative easing in its support to the replica tax and budget Ottawa to this pandemic and the measures of containment of the underlying. Exceptional action that leads to a magnification speeded up the balance sheet of the central bank from giving the extent of the effort the government made. The central bank has bought some $ 200 billion of assets since mid-march, more than double the size of its asset in the balance sheet before the crisis, retained Oxford Economics. And she intends to expand her action, she announced Wednesday. “Easing considerable monetary policy [is] necessary to prepare the ground for economic recovery that will follow,” said the governor of the central bank, Stephen Poloz,

This firm’s research sales to 315 billion, or approximately 14 % of the canadian GDP, the aid programs of both Ottawa and the provinces, and this, without taking into account the expansion, announced Wednesday, of the to access the Service canada emergency, including the people earning $ 1000 or less per month. According to the data of Oxford, 265 billion, or the equivalent of 11.5 % of GDP, come from Ottawa, the 50 billion (2.2% of GDP) of the provinces. An effort both unprecedented and rather muscular on a comparative basis.

In a small note published on Wednesday, taking the projected target of the international monetary Fund from a deficit leaping to slightly below 12 % of GDP in 2020, the analysts of the National Bank hold that Canada will be the only well-known developed country to experience a deterioration also strong on a year. This increase is the result of both the deterioration in economic activity and tax assistance and exceptional fiscal deployed to mitigate the effects of this pandemic.

But, small consolation, as the parliamentary budget officer (DPB), which concluded that the existence of a margin of manoeuvre to Ottawa for the debt, Canada will position itself favorably relative to the G7 in this game of comparison with a ratio of net debt-to-GDP ratio slightly above 40 % expected at the end of 2020, compared to an average of 107 % for the G7, and a ratio of gross debt to GDP ratio of 110 % compared with 135 %, to resume the data of the National Bank.

On April 10, and on the basis of measures of federal assistance to support direct totaling $ 28.5 billion, as announced on 11 march and 18 march, the DPB stated that the increase in the budget deficit and the decrease in the nominal GDP will bring the ratio of federal debt to GDP to 38.1% in 2020-2021, for the first time since 2003-2004. “However, it remains well below the peak 66.6% achieved in 1995-1996,” he added, while stating that the additional measures announced after the march 23, are not included in its calculation.

As this debt accumulates, of course, in a deflationary environment, but its weight is mitigated by interest rates maintained at historic lows. And by the hope that these measures are temporary for the most part, will pave the way to an income tax recovery recognized in 2021.

Remains Canada’s triple-A, a credit rating, which could become an issue this year. The analysts of the National have established a comparison with eight countries also have the highest rating. In this sample, the median ratio net debt-to-GDP ratio was around 23 % and the gross debt-to-GDP ratio of 44 %, they wrote. Not to mention that Canada is home to the provinces oil in poor health.

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