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Canada predicts historic deficit due to pandemic spending

Prime Minister Justin Trudeau arrives for a news conference on the COVID-19 pandemic outside his residence at Rideau Cottage in Ottawa, Thursday, June 18, 2020. (Justin Tang/The Canadian Press via AP)
Prime Minister Justin Trudeau arrives for a news conference on the COVID-19 pandemic outside his residence at Rideau Cottage in Ottawa, Thursday, June 18, 2020. (Justin Tang/The Canadian Press via AP)

OTTAWA, ONT – The Canadian government is predicting a historic CDN$343 billion (US$254 billion) deficit for 2020-21 resulting from its economic and stimulus plans to battle COVID-19.

The amount, included in a fiscal “snapshot” the Liberal government released Wednesday, is a huge jump from the CDN$28.1 billion (US$20.8 billion) deficit projected prior to the pandemic.

The report says that since March, the federal government has spent more than CDN$231 billion (US$171 billion) on health and safety measures as well as direct aid to Canadians and businesses.

Prime Minister Justin Trudeau defended the government’s spending as a lifeline to Canadians battling to stay afloat.

“We decided to take on that debt to prevent Canadians from having to do it,” he told a news conference. “I know there are people out there who said we should have done less. I think that’s wrong. Now is the time for the federal government to step up and help Canadians during a historical crisis.”

The national debt is projected to climb to CDN$1.2 trillion (US$89 billion) while the economy is expected to shrink by 6.8 percent. An estimated 5.5 million Canadians have either lost their jobs or have seen their hours reduced.

The debt-to-GDP ratio is expected to rise from 31% to 49% because of the emergency spending.

The government expects unemployment to hit 9.8% this year then fall to 7.8% next year. Unemployment was at a record low of 5.5% in January.