Canada's Budget Deficit to Reach Record-High $289Bln in Fiscal Year 2020-21 - Watchdog

TORONTO (Pakistan Point News / Sputnik - 31st March, 2021) Canada's budget deficit is projected to increase to $289.07 billion in fiscal year 2020-21 amid record spending in response to the novel coronavirus pandemic, the Parliamentary Budget Officer (PBO) said on Wednesday.

"PBO projects budgetary deficits of $363.4 billion and $121.1 billion in 2020-21 and 2021-22, respectively," the parliamentary budget watchdog said in a pre-budget outlook.

PBO noted that the budget deficit will account for 16.5 percent of Canada's gross domestic product (GDP), the highest share since records were first kept, starting in fiscal year 1966-67.

The PBO added that the Canadian government's debt-to-GDP ratio will climb to nearly 50 percent in the next fiscal year, its highest point since 1999 but lower than during the 1995-96 debt crisis.

The budget watchdog also revised its recovery projections, saying that the Canadian economy will return to pre-pandemic levels before the end of 2021 resulting, partly, because of a rebound in global crude oil prices.

However, the PBO's projections are based on a tame third of wave of the coronavirus pandemic and do not take into account further government spending sprees, including the Liberal government's proposed stimulus of 3 to 4 percent of the country's GDP - up to $77 billion - per annum over the next three fiscal years to kick-start the economic recovery.

The PBO said the sizing and timing of the proposed stimulus suggests it is "mis-calibrated."

Canada's ability to service debt has previously come into question, with Fitch Ratings stripping Canada of its AAA debt rating citing a "deterioration of public finances" in July and warning of additional downgrades with the fiscal outlook does not improve.

Deputy Prime Minister and Finance Minister Chrystia Freeland announced last week that the government will present the country's first budget in two years on April 19.