No other major advanced economy tracked by the IMF is expected to record a larger one-year fiscal swing
Prime Minister Justin Trudeau is set release his first estimate of the full cost of the multiphase effort to buffer Canada from its deepest recession since the 1930s.
While the massive shortfall has broad political support, it’s dramatic departure for a country with a longstanding aversion to debt and leaves Canada with the prospect of running large deficits for years to come. Morneau, the first finance minister to oversee a credit rating downgrade in 25 years, is under pressure to provide at least cursory assurances the government will return to a more fiscally prudent path once the coronavirus crisis has passed.
Trudeau’s government has already budgeted direct COVID-19 spending of $174 billion, almost half to finance a $2,000 a month payment to those who’ve lost jobs or income as a result of the economic crisis. More than 8 million people have received at least one payment under the so-called Canada Emergency Response Benefit.
A deficit-fighting mindset remained in place for years, until Trudeau rode an anti-austerity platform to power in 2015 and again last year. Even then, his deficits were modest, hovering at less than 1 per cent of GDP. Trudeau, whose party lacks a majority in parliament, is facing pressure from his left to prolong government aid. “We’re not out of this pandemic yet. Canadians – and our economy – need the supports to continue,” Jagmeet Singh, leader of the New Democratic Party, said in an email.
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