No other major advanced economy tracked by the IMF is expected to record a larger one-year fiscal swing
Prime Minister Justin Trudeau is set release his first estimate of the full cost of the multiphase effort to buffer Canada from its deepest recession since the 1930s.
Trudeau’s finance minister, Bill Morneau, will provide a fiscal update Wednesday that’s expected to show a current-year deficit of at least $250 billion, or 12 per cent of economic output. The gap last year was about 1 per cent of gross domestic product.
The Globe and Mail newspaper reported late Tuesday the figure will exceed $300 billion. No other major advanced economy tracked by the International Monetary Fund is expected to record a larger one-year fiscal swing in 2020.
While the massive shortfall has broad political support, it’s dramatic departure for a country with a longstanding aversion to debt and leaves Canada with the prospect of running large deficits for years to come. Morneau, the first finance minister to oversee a credit rating downgrade in 25 years, is under pressure to provide at least cursory assurances the government will return to a more fiscally prudent path once the coronavirus crisis has passed.
The question is “what the next one, two, three years are going to look like and what the appetite is going to be to pull that deficit back down,” Robert Kavcic, senior economist at BMO Capital Markets, said by phone, adding it may be too early for the government to give much guidance.
DEBT MANAGEMENT
It’s unclear whether Morneau will provide forecasts beyond the current fiscal year. The figures will be released around 1:40 p.m. in Ottawa, when the finance minister is due to deliver the “economic and fiscal snapshot” in parliament. He’s expected to announce some details around plans to extend debt duration to lock in historically low interest rates, one senior government official told Bloomberg, on condition they not be identified.
Source: Bloomberg News — Kait Bolongaro | Financial Post
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