The DPB estimated that the increase in the budget deficit and the sharp decline in nominal GDP will increase the ratio of federal debt to GDP to 44.4% in 2020-2021.
18 June 2020 17: 12
The federal deficit could reach $ 256 billion $
The canadian Press
OTTAWA — The federal deficit could reach $ 256 billion $ this year because of the pandemic of COVID-19, according to the parliamentary budget officer.
This estimate, published in a report made public Thursday morning, is the combination of all federal spending on emergency assistance, estimated at $ 169 billion $, and a decrease in historical production during the economy was “paused”.
The Office of the parliamentary budget officer estimates that there could be an economic contraction of 6.8% in 2020. It is therefore the result of the real GDP, the lowest since 1981 and the double of the record contraction of 3.2 % posted in 1982.
The overall deficit is higher than $ 3.8 billion from previous guidance of the DPB. Yves Giroux attribute this small difference to the better economic outlook in the second half that offset new expenditures. Mr. Giroux previously estimated that the economy could contract by 12% in 2020.
The DPB estimated that the increase in the budget deficit and the sharp decline in nominal GDP will increase the ratio of federal debt to GDP to 44.4% in 2020-2021. “The last time that the ratio of federal debt to GDP has reached more of 44.4 %, it was in 2001-2002,” the report of the DPB. However, it remains well below the peak of 66,6 % in 1995-1996.”
The DPB points out that these figures are the result of one of many possible scenarios and not a prediction ensured.
The report is published in the wake of the promise made by the prime minister Justin Trudeau to deliver, on 8 July, a “portrait” of the federal finances, which will provide estimates of expenditure in the short term. Mr. Trudeau warned that the document would not provide longer-term outlook because of uncertainty about the direction of the economy in the months and years to come — all based on the evolution of the pandemic.
The liberals were pressured by opposition parties to publish an economic update or budget, which has been postponed because of the pandemic. The government had initially planned to file a budget by the end of march. Since then, members have approved expenditure of an emergency to provide assistance to Canadians who have lost their jobs or whose hours were reduced, and financing for private companies due to the restrictions of public health.
Mr. Giroux also published on Thursday an update of cost estimates for two of the flagship programs that the liberals have put in place and are in the process of reorganizing : the Benefit to canadian emergency (PCU) and the wage Subsidy emergency.
The DPB is now estimated that the ECPS of $ 2000 per month will cost 61,1 billion $ to the government, but will yield $ 7.7 billion $ in tax revenue, when the beneficiaries will be taxed on the income in the next year. The liberals have also promised to extend the PCU until the end of August, so that beneficiaries can receive for 24 weeks, rather than 16; they have already revised the budget for this program to $60 billion.
When the ministry of Finance has increased the budget of the PCU, it has also lowered the cost of the wage subsidy program of $ 73 billion $ 45 billion $, to take account of the participation rate — lower than expected. The office of Dr. Giroux believes that the wage Subsidy emergency cost 55.6 billion $ to the treasury.