Fiscal Monitor for April –June 2020


June 2020
The federal government recorded a deficit of $33.6 billion in June 2020, compared to a surplus of $1.3 billion in June 2019. This deterioration primarily reflects the impact of the COVID-19 on economic growth and the temporary COVID-19 support measures in June 2020. Budgetary revenues decreased by $7.9 billion (28.5%), program expenses increased by $27.9 billion (114.4%), while public debt charges declined by $0.9 billion (41.3%) from year earlier levels. 

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CHALLENGES FOR POST COVID BUDGET PLANNING



In the July 8, 2020 “Economic and Fiscal Snapshot”, the Government presented revised fiscal projections for 2019-20 and 2020-21 only.  It stated that “given the unprecedented degree of uncertainty clouding the economic outlook, providing an economic and fiscal forecast beyond 2021 with an appropriate degree of confidence is not possible at this time and would potentially be misleading”.

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PLANNING FOR A FALL BUDGET


The government has been under pressure for some time to provide an economic and fiscal update.  Everyone was aware of the huge increase in spending that had been incurred to assist Canadians during the Covid-19 pandemic and the impact it would have on the deficit for this fiscal year. The Parliamentary Budget Office (PBO) had been releasing forecast updates of the deficit for 2020-21 on a regular basis.

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No Need to Panic About the Deficit - Yet

 

The economy is in a downfall.  Federal and provincial governments have shut down the economy to contain a deadly virus.  Businesses have closed, jobs have been lost and unemployment has soared.

This year, real GDP could fall by 10 to 15%, or even more, which is larger than the decline in output during the Great Depression. Although some social isolation restrictions are being lifted, at this time, given all the uncertainty, no one really knows how large the decline in output will actually be.

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BE DECIVESS MR. MORNEAU


Early this week the Prime Minister announced that new policy measures to address the COVID-19 virus would be released on Wednesday. Expectations were high that he would respond with a substantial package of policy initiatives to support Canadians and the economy.

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THE GLOBAL VIRUS RECESSION

 

In 2008, the global economy was shocked into a recession by a meltdown in global financial markets. G-20 leaders reacted quickly to the deteriorating economic situation with a coordinated fiscal policy response. The International Monetary Fund encouraged those countries that had the fiscal flexibility to implement fiscal measures amounting to 2 per cent of the their economies. The resulting fiscal stimulus went a long way to mitigate the impacts of the global recession.

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