Federal deficit could hit $256 billion, PBO says in new report

Federal deficit could hit $256 billion, PBO says in new report

Federal deficit could hit $256 billion, PBO says in new report

OTTAWA — The federal deficit could be on track to hit $256 billion this fiscal year due to the COVID-19 pandemic, Parliament’s budget watchdog says in a new estimate that doesn’t account for this week’s extension to a cornerstone benefit for workers.

Budget officer Yves Giroux’s report said the deficit estimate is the combination of a projected $169 billion in federal spending on emergency aid and a historic drop in economic output.

The overall deficit figure is only $3.8 billion higher than Giroux’s office previously predicted despite some major new government spending plans, which his report says is due to a better economic outlook for the second half of the year.

But the figures don’t include the extra cost for a promised extension of the Canada Emergency Response Benefit to provide eight more weeks of payments to recipients about to hit the current 16-week maximum, nor the possible cost to make some of the measures permanent.

Giroux also warned that spending could go up further if the government pumps more stimulus to promote economic recovery, beyond the $14 billion the Liberals have promised to provinces to help minimize the risks in reopening workplaces.

Possible changes and uncertainty about the course of the pandemic led Giroux to stress that the figures in his report are the outcome of one of many possible scenarios and not a certain forecast.

The report comes one day after Prime Minister Justin Trudeau promised to deliver a “snapshot” of federal finances on July 8 that will provide short-term spending estimates.

Trudeau warned the document won’t provide a longer-term outlook because of uncertainty about where the economy will go in the coming months and years — all of which rests on the path of the pandemic.

The budget office estimates the economy could shrink by 6.8 per cent in 2020, the weakest showing since 1981 and double the record of 3.2 per cent shrinkage in 1982.

Previously, Giroux estimated the economy could shrink by 12 per cent in 2020.

The Liberals have been under pressure from opposition parties to release a fiscal update or a full 2020 budget. The government had originally planned to release a budget in late March but shelved it when COVID-19 hit.

Since then, MPs have approved massive emergency spending on aid to Canadians who have lost their jobs or had their hours slashed, and financing to businesses shuttered due to public health restrictions.

The latest figures from the Finance Department peg the total package of pandemic-related aid at $153.7 billion in direct spending, but Giroux estimates the price tag will be closer to $169 billion at this point.

That’s about half what the federal government spends in a normal year.

The budget office now estimates the $2,000-a-month CERB will cost the government $61.1 billion — just above the $60 billion budgeted by the government as demand soared — but pull $7.7 billion back in when recipients are taxed on the income next year.

When the Finance Department increased the estimated cost of the CERB, it also lowered the cost for a wage-subsidy program for private employers from to $45 billion from $73 billion based on the take-up rate among businesses.

Giroux’s office estimates the wage subsidy to cost the treasury $55.6 billion, though it warns the figure depends heavily on how businesses respond as they’re allowed to reopen.

In a speech Thursday, a senior Bank of Canada official noted that federal spending measures should continue to buffer income losses and support household spending during the early stages of the economic recovery.

Deputy governor Lawrence Schembri in a videoconference speech said that a forthcoming survey of consumer expectations will show that respondents receiving federal support have spent or expect to spend on average 70 per cent of their benefits.

The text of his speech released by the bank notes that recent data indicate a recovery is underway, with a first phase being sharp and short, followed by a longer “recuperation” period influenced by the course of the pandemic.

This report by The Canadian Press was first published June 18, 2020.

The Canadian Press

deficits

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Alberta has 3,651 active cases of COVID-19.  (File photo)
750 new COVID-19 cases identified in Alberta Sunday

Central zone currently has 1,182 active cases of the virus

The Pfizer-BioNTech vaccine deliveres to Canada are being delayed because of complications at their European distribution facility. THE CANADIAN PRESS/Nathan Denette
Delays of Pfizer vaccine delivery to impact Alberta’s vaccination plans

Alberta has administered 74,000 doses of the COVID-19 vaccine so far

blessing
Bentley Blessing Pantry continues to faithfully serve the community

‘We just wanted to make everyone aware that we are still here to serve you throughout this coming year.’

A scene from “Canada and the Gulf War: In their own words,” a video by The Memory Project, a program of Historica Canada, is shown in this undated illustration. THE CANADIAN PRESS/HO - Historica Canada
New video marks Canada’s contributions to first Gulf War on 30th anniversary

Veterans Affairs Canada says around 4,500 Canadian military personnel served during the war

Lacombe is looking at its options for reclaiming sewage lagoons that are no longer needed. Vesta Energy Ltd. has signed a deal to use three lagoons to store water for fracking.
Map from City of Lacombe
Energy company to use former Lacombe sewage lagoons to store fracking water

Vesta Energy Ltd. will pay Lacombe more than $100,000 a year in 20-year deal

Eleven more Albertans die from COVID-19

There were 739 people in hospital, 120 in ICU on Monday

World Juniors’ referee Mike Langin makes a called during the Canada vs. Slovakia at the 2021 World Junior Championship at Rogers Place in Edmonton, Dec. 27, 2020. (Photo by Matthew Murnaghan/Hockey Canada)
Former Sylvan Lake man lives his dream at World Junior Championships

Mike Langin was one the 25 Canadian officials who worked during the tournament

Indigenous people gather for a ceremony for Cindy Gladue held at the courthouse in Edmonton, Alta, on Wednesday, January 13, 2021. Bradley Barton, a 52-year-old long-haul truck driver from Ontario on trial for manslaughter, is accused of killing Gladue. THE CANADIAN PRESS/Jason Franson
People stand in support of mother as new trial gets underway in death of Cindy Gladue

Bradley Barton, a long-haul truck driver from Ontario, will now be tried for manslaughter in the 2011 death

(Photo submitted)
RCMP say ice climber seriously injured after reportedly falling 12 metres near Abraham Lake

Police say man’s injuries were serious but not life-threatening

U.S. military units march in front of the Capitol, Monday, Jan. 18, 2021 in Washington, as they rehearse for President-elect Joe Biden’s inauguration ceremony, which will be held at the Capitol on Wednesday. (AP Photo/J. Scott Applewhite)
Biden aims for unifying speech at daunting moment for U.S.

President Donald Trump won’t be there to hear it

Facebook/ The Open Door 24/7 Integrated Response Hub- Wetaskiwin.
Wetaskiwin residents show support for 24/7 Integrated Response Hub

Wetaskiwin residents and City Council members showed support for Hub with positive signs.

Conservative Leader Erin O’Toole holds a press conference on Parliament Hill, in Ottawa on December 10, 2020. THE CANADIAN PRESS/Sean Kilpatrick
No place for ‘far right’ in Conservative Party, Erin O’Toole says

O’Toole condemned the Capitol attack as ‘horrifying’ and sought to distance himself and the Tories from Trumpism

Most Read