The Deputy Prime Minister and Minister of Finance, Chrystia Freeland, delivered the Government’s Fall Economic Statement today. The Statement offers a first glimpse of the Government’s medium-term fiscal outlook. Here is what you need to know:
- Federal deficits will continue for the foreseeable future: The Government projects deficits of $381.6 billion in 2020-21, $121.2 billion in 2021-22, and $50.7 billion in 2022-23. Note that those figures do not include the impact of a fiscal stimulus program for the recovery from COVID-19, totalling 3-4% of GDP over three years, that the Government is proposing.
- Debt to GDP ratio to peak at around 50%: The Government released updated debt to GDP figures that reflect increased expenditures to date on responding to COVID-19. The Federal debt to GDP ratio is projected to rise from 31.2% in 2019-20, to 50.7% in 2020-21, 52.6% in 2021-22, and 52.1% in 2022-23. The Government emphasizes that, while the debt to GDP ratio is increasing, debt servicing costs are projected to remain low.
- New COVID-19 spending: The Statement announced a number of new measures to help individuals and businesses that have been impacted by COVID-19. Most notably for businesses, the Government announced that the maximum benefit under the Canada Emergency Wage Subsidy will be increased to 75% and that a Highly Affected Sectors Credit Availability Program will be launched to support the hardest hit sectors of the economy.
- Targeted recovery spending: The Government announced a select few programs aimed at spurring a green, sustainable and equitable long-term recovery from COVID-19, including a new program to provide grants to retrofit residential homes, funds to begin work towards a Canada Wide Early Learning and Child Care System, and additional fiscal transfers to the Provinces for skills and employment training.
- Long-term stimulus program: The Government announced plans for a targeted stimulus program in Budget 2021, with some early “down payments” on that plan included in the Fall Economic Statement. The Government plans to spend between 3-4% of GDP over the next three fiscal years through the stimulus program.