Governments Act Quickly and Dramatically: Canada’s Two-Year Government Outlook
The Conference Board of Canada, 12 pages,
November 3, 2020
This quarterly economic forecast presents the medium-term outlook for the Canadian economy. This release focuses on government. For an overview of all major components of the economy, go to the Canadian Outlook main page.
- The COVID-19 pandemic shuttered the Canadian economy, forcing governments to intervene dramatically to dampen
the impacts of the worst recession on record.
- Governments acted quickly. Over the last six months, they have pumped billions into the recovery effort. Doing most of the heavy lifting is the federal government, which introduced generous emergency benefits for individuals and wage subsidies for businesses, and injected huge amounts of liquidity into the economy. Overall, the federal government stimulus will account for over 12 per cent of GDP in 2020.
- These necessary measures do not come cheaply. The stimulus package, combined with plummeting tax revenues, will see the deficit balloon to more than $350 billion this fiscal year, by far the largest deficit on record.
- While the federal government should remain in decent shape going forward provided this level of spending is temporary,
the provinces will struggle over the near term. Collective provincial deficits are at record highs and will not be improved as easily. Rising spending on health care due to population aging will coincide with a weakening of the revenue base.
- Cities will also struggle as their revenues plummet. Municipalities have few options to fill the hole. Provincial and municipal governments will all be looking to the federal government for further financial assistance.