The coronavirus pandemic sweeping the globe could send the Canadian unemployment rate soaring to 15 per cent by the end of the year, a new forecast by the parliamentary budget watchdog suggests.
At the same time, the federal deficit could spike to $113 billion by the next fiscal year.
The current federal deficit sits at roughly $26.6 billion while the national unemployment rate in February was 5.6 per cent.
Parliamentary budget officer Yves Giroux published a forecast report on Friday looking at what the economic and fiscal impacts could be on Canada of the coronavirus pandemic.
In it, Giroux cautioned that the forecast is built around a number of assumptions, including that current isolation and social distancing measures will stay in place until August.
But he noted that the office will continue to update projections as the situation evolves.
“We stress that this scenario is not a forecast of the most likely outcome,” he wrote.
“It is an illustrative scenario of one possible outcome.”
Giroux’s report came at the same time as the Bank of Canada slashed its key interest rate to 0.25 per cent in an unscheduled Friday morning cut.
Globally, there are now 549,604 cases of COVID-19, the disease caused by the new coronavirus, with the U.S. leading the number of cases.
A total of 24,863 people have died so far from the virus.
In Canada, the number of confirmed cases stands at 4,018 and the number of deaths at 39 as of Friday morning.
The coronavirus pandemic has roiled stock markets over recent months as social distancing and border shutdowns hit supply chains and shrink consumer demands on businesses.
Widespread shutdowns are in place across Canada, with Quebec and Ontario limiting business operations to “essential” functions only and ordering all others shut down.
There are also bans in place on gatherings ranging from 10 to 50 people, and the government on Wednesday invoked the Quarantine Act to mandate all returning travellers going forward stay in isolation for 14 days.
Sectors like retail, tourism and the airline industry are feeling the brunt of the impact, with hundreds of thousands of layoffs reported across industries and over 500,000 people applying for employment insurance last week after it was opened up more broadly by the government.
That change came as part of a $107-billion coronavirus support package passed on Wednesday.
The government had initially said the plan would include roughly $27 billion in supports for workers with roughly another $55 billion in tax deferrals and credit programs.
But the legislation it introduced included a more equal split between those, with roughly $55 billion on both worker supports and the more tax and credit-focused measures.
Giroux had said in a previous report that the government could increase spending by about $41 billion and keep its debt-to-GDP ratio sustainable in the long term.
The current debt-to-GDP ratio is roughly 34 per cent and the deficit increase to $113 billion would increase the ratio to around 38 per cent, a move that approaches the 40 per cent point at which some experts have suggested debt would become unsustainable long-term.
Giroux said in an interview with the Globe and Mail last week that the major question is whether the government will be able to scale back the programs it has put in place once the crisis ends, and actually bring its debt load back down.