Canada predicts historic deficit due to pandemic spending

Finance Minister Bill Morneau.
			By David Opinko	
		BREAKING Canada’s deficit projected to hit $343-billion				Jul 08 2020

Finance Minister Bill Morneau. By David Opinko BREAKING Canada’s deficit projected to hit $343-billion Jul 08 2020

Canada handled the novel coronavirus outbreak better than many of its allies, including the United States, Prime Minister Justin Trudeau said on Wednesday, in a rare public comment on the faltering U.S. effort.

Morneau said the debt is manageable, because of borrowing costs that are actually lower than past year due to falling interest rates.

Canada's overall debt is slated to hit $1.2 trillion.

Canada - with a population a tenth of the size of the United States - has so far recorded 8,711 deaths and 106,167 cases and Trudeau said the situation was stabilizing, although some hotspots remained.

An estimated 5.5 million Canadians have either lost their jobs or have seen their hours reduced. The swollen deficit is largely a result of higher projected spending under Ottawa's two key COVID-19 financial aid programs, the Canada Emergency Wage Subsidy (CEWS) and the Canada Emergency Response Benefit (CERB), which have been repeatedly extended and expanded in recent months.

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Sheila Block, a senior economist with the Canadian Centre for Policy Alternatives, said the uncertainty about the course ahead suggested the need to maintain or even increase spending: "Now is not the time for rash spending cuts and a turn to austerity".

Trudeau notes that the national number of COVID-19 cases, hospitalizations, and deaths is continuing to decline, but says there are still hotspots in some parts of the country, including in long-term care facilities and agricultural work settings.

But the coronavirus shutdown triggered the country's biggest economic downturn since the Great Depression, says a press release from the finance minister.

Trudeau said the U.S. doesn't produce almost enough aluminium to be able to cover its needs.

Andrew Scheer, Leader of Canada's Conservatives and of the Official Opposition, states, "Today was an opportunity to reverse course and put Canadians first". The expected unemployment rate at the end of 2020 is expected to be 9.8 per cent.

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"At the same time, we are concerned about the threat of extra tariffs on aluminium and possibly steel", Trudeau added.

In June, Fitch Ratings, one of the US's big-three credit rating agencies, downgraded Canada's credit rating from AAA to AA+.

"It is now time for Canada to transition from a subsidy-based crisis response toward restoring economic growth and getting Canadians safely back to work. So where is the prime minister's plan to set us apart?"

The anticipated deficit represents a 1,633 percent rise over the $14.66 billion budget shortfall in the fiscal year 2019-20 and 181-fold rise from the $1.41 billion surpluses the Trudeau government inherited from the previous government in 2015.

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