The Parliamentary Budget Officer (PBO) now says that the federal government’s budget deficit this year could reach an estimated $328.5 billion and lead to permanent budget shortfalls moving forward.
The PBO office says in a new report that the COVID-19 pandemic will leave a lasting scar on the Canadian economy. The latest budget deficit estimate of $328.5 billion includes measures announced as of the start of September, including an estimated $225.9 billion in emergency aid to mitigate the impacts of the global pandemic.
The scenario budget officer Yves Giroux, outlined in his updated outlook, suggested economic output won't return to pre-pandemic levels until 2022 and will still be below where it would have been had the pandemic never happened. The national unemployment rate won't be at or below where it was in February of this year until 2023.
The PBO says the budget deficit will fall to about $73.8 billion in 2021 and continue to fall in ensuing fiscal years. But in recognition of how dramatically the government's fiscal position has changed, the PBO estimates deficits roughly $40 billion larger each year, on average, compared to the outlook the office provided before the pandemic.
The PBO’s latest estimates assume a "slow burn" scenario for the pandemic, meaning it doesn’t account for a spike in cases or further economic shutdowns this fall and winter. Canada’s overall debt this year is expected to push past $1 trillion and continue to climb. As a percentage of the economy, the debt could peak at 48.3% in 2023 before finally falling under the PBO's estimates.
