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.
Document Highlights
Much like last year, the government continues to be an essential source of financial support for citizens and businesses alike in these unprecedented economic times. With Budget 2021, the government added more to the expenditure bill, but also outlined how the bulk of the income measures will wind down in the back half of this year. This winding down is essential. After a year and half of historic spending, the federal government finds itself in a massive fiscal hole.
Combined with the drop in tax revenues, federal estimates peg the deficit at $354 billion in 2020–21 and $155 billion in 2021-22, ranking 1 and 2 on the highest deficits in Canadian history. At nearly $80 billion, the collective provincial deficit pales in comparison to the federal number, but faces a far grimmer outlook. Population aging, which limits revenues and increases demand pressures on the health care system, has exacerbated the structural fiscal problems facing the provinces.
Getting out of this fiscal hole will certainly translate to increased taxes, reduced spending, or more likely a combination of the two over the next decade.
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