Parliament’s budget watchdog says that it’s likely the federal deficit for the year will hit $252.1 billion as a result of the COVID-19 pandemic, and could go even higher if emergency measures remain in place longer than planned.
The figure is an estimate based on the almost $146 billion in spending measures the government has announced to help cushion the economic blow from the pandemic, estimated declines in the country’s gross domestic product, and the price of oil remaining well below previous expectations.
Parliamentary budget officer Yves Giroux’s report assumes real GDP will contract by 12 per cent this year, and help shoot the federal debt-to-GDP ratio to 48.4 per cent.
“To date, budgetary measures announced by the government are intended to be temporary. Once the budgetary measures expire and the economy recovers, the federal debt-to-GDP ratio should stabilize,” Giroux says in a statement.
“But if some of the measures are extended or made permanent, the federal debt ratio will keep rising.”
He also warns anew that extra spending may be required if the situation persists for longer than expected, or the economy is slow to recover when restrictions are lifted.
His report says the estimates are one possible scenario if current public health measures remain or are slowly, but not entirely, lifted over the rest of the calendar year.
The Liberals have said that they would spend what was needed in order to bridge businesses and workers through the crisis. Prime Minister Justin Trudeau wouldn’t speculate Thursday on how the government would handle the massive deficit once the economy rebounds.
“There will be time after this is all done as we figure out how exactly this unfolds, where we will have to make next decisions on how that recovery looks,” he said at a news conference on Parliament Hill, “but right now our focus is on getting through this together as a country.”
The restrictions that were put in place in March across the country forced non-essential businesses to close their storefronts, sending many employees who could to work from home. Others were laid off or had their hours slashed.
So far, more than seven million people have received federal emergency aid through the Canada Emergency Response Benefit, which has paid out more than $25.6 billion in benefits, based on the latest federal figures.
The Liberals have budgeted $35 billion for the CERB, which pays $2,000 a month for up to 16 weeks to anyone whose income has dropped below $1,000 a month. Giroux’s report estimates the measures will end up costing the government $35.5 billion.
A more detailed note explaining the figure, published separately this morning, estimates the CERB will end up reaching 8.5 million people.
But the note warns the estimates are “highly sensitive” to the course the economy takes over the coming months, as well as the spread of COVID-19. Some of the spending, too, will rest on the interaction the program has with a new wage subsidy program that begins payments next week.
Giroux also estimates the wage subsidy program will cost $76 billion, slightly higher than the $73 billion price tag the Liberals have put on the measure.
The subsidy will cover 75 per cent of employee salaries, up to $847 a week for 12 weeks, retroactive to mid-March and through to the start of June.
In a costing note specifically about the subsidy, the PBO says the cost of the program will depend somewhat on the behavioural response of employers.