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Liberals project a $343.2 billion deficit this year

$343.2B deficit projected

UPDATED: 11:25 a.m.

The Trudeau Liberals say they expect nearly two million Canadians to remain without jobs this year as the COVID-19 pandemic drags down the domestic economy and federal aid sends the deficit to a historic $343.2 billion.

The economic and fiscal "snapshot" from the government today lays out the Liberals' belief that there will be a slow return to a new normal, with unemployment high and economic growth low through to at least the end of 2021.

Even though the government believes the worst of the economic harm from the pandemic is behind the country, the document says a recovery can't begin in earnest until an effective vaccine or treatment becomes widely available.

Things could, however, get worse under two alternative scenarios the Finance Department lays out.

Should prolonged shutdowns stay in place, or restrictions not fully roll back, a return to normal activity for households and businesses will be uneven and slower than hoped for, leading to a more pronounced drop in economic output than is already expected.

And should the country be hit with a second wave of the novel coronavirus during the annual flu season, the ensuing lockdowns would cause what the Finance Department describes as a "deeper and longer-lasting negative impact on the economy."

The Liberals have repeatedly promised to use the federal treasury as a financial shield between Canadians and irreparable harm, and the cost of that promise is now at $231.9 billion in direct spending and a deficit comparable only to those seen in the Second World War.

Whatever the costs, they're worth it, Prime Minister Justin Trudeau said in a news conference Wednesday morning, before the snapshot was released.

"As we measure the cost of helping Canadians, we shouldn't forget that the cost of doing nothing would have been far more," Trudeau said, insisting that this is not the time for belt-tightening or austerity.

The document tries to make that case, saying that the $80-billion Canada Emergency Response Benefit, which had paid out $53.5 billion in benefits as of late June, has covered Canadians' estimated $44.6 billion in lost labour income through the first half of the year.

The $2,000-a-month benefit is estimated to have covered the monthly housing, food, phone and internet costs for the bottom and middle thirds of households, according to Finance Department calculations.


ORIGINAL: 9:35 a.m.

The federal Liberals are to lay out today how they see the COVID-19 pandemic affecting government finances for the fiscal year including an estimated deficit and a projected path for the economy.

Finance Minister Bill Morneau is to release what the government has styled a fiscal and economic snapshot.

The Liberals have regularly updated MPs about total spending on emergency aid, which by last count amounted to over $174 billion, but have yet to put a figure on the deficit for the fiscal year.

The parliamentary budget office has suggested the deficit could be as deep as $252 billion.

Other private sector estimates suggest $300 billion wouldn't be out of the realm of possibility.

Whatever the costs, they're worth it, Prime Minister Justin Trudeau said in a news conference Wednesday morning, before the snapshot was released.

"As we measure the cost of helping Canadians, we shouldn't forget that the cost of doing nothing would have been far more," Trudeau said, insisting that this is not the time for belt-tightening or austerity.

Historically low interest rates mean all the borrowing comes with "manageable" costs, he said, and the alternative would be for individuals and households to load up with debt themselves to cope with months of no or little work.

Opposition parties have said they expect Morneau to provide a road map for reshaping emergency aid measures that are set to expire in the fall and keeping spending and deficits under control.

In his own morning news conference, Conservative Leader Andrew Scheer said the Liberals mishandled the COVID-19 pandemic by being slow to close borders and by instituting too-rigid emergency aid programs.

Canada can't afford for the Liberals to mishandle the economy as well, he said, by keeping benefits in place that remove incentives to go back to work while the novel coronavirus remains a risk.

"Liberals put all their faith in government, Conservatives put our faith in people," Scheer said.

He said the Liberals should take up a Conservative proposal to offer a "back to work bonus" and send more money to the federal auditor general so her office can study the government's spending more closely.

Fuelling the deficit is an unprecedented drop in economic output and employment that will cut revenues the government expected to receive this year.

Morneau's document is also to provide the government's view for the economy over the coming months.

The finance minister has said the document won't have a five-year forecast traditionally part of federal budgets owing to the uncertain path the pandemic will take.

The Bank of Canada has said it believes the economy has avoided a worst-case scenario due to COVID-19 but is still in for a rough ride this year.

Last month, the central bank updated its GDP forecast, foreseeing a decline between 10 and 20 per cent in the second quarter compared with the fourth quarter of 2019. That is an improvement from the 15-to-30-per-cent drop in the quarter highlighted in the bank's worst-case scenario in April.

Next week, the Bank of Canada is to again update its forecasts when it releases a monetary policy report along with a scheduled rate announcement.



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