The federal deficit could be on track to hit $256 billion this fiscal year due to the COVID-19 pandemic, Parliament’s budget watchdog says in a new estimate that doesn’t account for this week’s extension to a cornerstone benefit for workers.
Budget officer Yves Giroux’s report said the deficit estimate is the combination of a projected $169 billion in federal spending on emergency aid and a historic drop in economic output.
The overall deficit figure is only $3.8 billion higher than Giroux’s office previously predicted despite some major new government spending plans, which his report says is due to a better economic outlook for the second half of the year.
Giroux also warned that spending could go up further if the government pumps more stimulus to promote economic recovery, beyond the $14 billion the Liberals have promised to provinces to help minimize the risks in reopening workplaces.
The report comes one day after Prime Minister Justin Trudeau promised to deliver a “snapshot” of federal finances on July 8 that will provide short-term spending estimates.
The budget office estimates the economy could shrink by 6.8 per cent in 2020, the weakest showing since 1981 and double the record of 3.2 per cent shrinkage in 1982.
In a speech Thursday, a senior Bank of Canada official noted that federal spending measures should continue to buffer income losses and support household spending during the early stages of the economic recovery.
Deputy governor Lawrence Schembri in a videoconference speech said that a forthcoming survey of consumer expectations will show that respondents receiving federal support have spent or expect to spend on average 70 per cent of their benefits.