Federal budget deficit could exceed $252 billion

Apr 30 2020, 1:52 pm

A new report from the Office of the Parliamentary Budget Officer has painted a grim picture of Canada’s immediate financial future, largely due to the fallout from COVID-19.

Published today, the report “provides an updated scenario analysis” that incorporates a revised economic scenario and new federal measures announced up to and including April 24, as well as updated estimates of previously announced measures.

And despite these recently announced measures, “additional fiscal measures may be required to support the economy in the coming months,” the report said. “Moreover, after support measures are provided, fiscal stimulus measures may be required to ensure that the economy reaches lift‑off speed, especially if consumer and business behaviour does not quickly revert back to ‘normal ‘ conditions.”

The report also assumes that “current COVID-19 control measures will remain in place in Canada through the spring and then will be gradually relaxed at a relatively slow pace — but not eliminated entirely — over the remainder of the year.”

And despite the agreement by members of the Organization of the Petroleum Exporting Countries and its partner countries earlier this month to reduce their production of crude oil, the report also assumes that “oil prices will remain well below their pre-crisis levels.”

According to the report, in this updated economic scenario, real GDP is assumed to decline by 2.5% in the first quarter and then again by 20% in the second quarter (both rates not annualized). Real GDP is then assumed to rebound modestly in the third and fourth quarters as epidemic control measures begin to be gradually relaxed.

For 2020, real GDP growth is assumed to be -12.0% which would be “by far the weakest on record since the series started in 1961,” the report said. To put this in a historical perspective, the weakest growth in real GDP on record (of -3.2%) was observed in 1982.

The report said its fiscal results include $146 billion in federal budgetary measures that have been announced as of April 24, based on Finance Canada and PBO cost estimates.

“Based on our updated economic scenario and including announced federal measures, the budget deficit would increase to $24.9 billion in 2019‑20 and then to $252.1 billion in 2020-21,” the report said.

Asked for his comments during his daily media briefing, Prime Minister Justin Trudeau said, “We will continue to support Canadians to get through this in the best possible way — focus on what we need to do now to get through this.”