OTTAWA – Canada’s deficit is growing at the fastest rate in developed countries as it seeks to boost its economy during the Covid-19 epidemic.
Canadian officials are betting that the aggressive approach will pay off, focus on the number of jobs already received, and argue that the country can finance the economy when the cost of borrowing is historically low. But some economists warn that spending heavily could lead to a financial crisis, and a major rating company has stripped the country of its triple-A rating.
Canada is not alone in its spending: The International Monetary Fund estimates that governments around the world have spent 12 12 trillion on reducing economic losses rather than halting transmission of the Covid-19. Canada’s virus-related costs, most of which are borne by the federal government, are about C 2 388 billion, or ૧ 4 billion, and account for about 1% of Canada’s total economic output.
Yet IMF data indicate that Canada’s financial position during the epidemic – involving all levels of government – has been the fastest growing in the group of 20 industrialized nations as it seeks to keep the economy pumping.
“If this spending is done properly, Canada can be a hero,” said Jimmy Gin, a strategist at Desertins Securities in Montreal. “If Canada failed, all emergency expenses could have been wasted, as we would not have the capacity to power post-vaccination recovery.”
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