Despite what appears to be a strengthening economic recovery, Canada’s Finance Minister Chrystia Freeland vowed to continue keeping the federal spending taps wide open, and do”whatever it takes” to support the economy.
The latest Statistics Canada data shows that GDP levels in the final quarter of 2020 increased by 9.6%, putting economic activity only 3% below pre-pandemic levels observed in February of last year. However, despite the optimistic figures and the ongoing vaccine rollout, Freeland reiterated the Liberal government’s commitment to continue spending throughout the Covid-19 pandemic. “Our government will continue to do whatever it takes, for as long as it takes, to help Canadians through this bleak time, to prevent economic scarring and to invest in a way that allows us all to come roaring back after COVID-19,” she said at a news conference in Ottawa on Wednesday.
At the news conference, Freeland, along with Prime Minister Justin Trudeau, announced that the federal government will be extending the current emergency wage and rent subsidies by an additional $15 billion from March until the end of June. Thus far, Ottawa has already spent $83.5 billion on the wage subsidy that has alleviated financial strain for 5 million Canadian workers, along with $4.4 billion on the rent subsidy that was allocated to 129,000 businesses.
In an effort to cushion Canada’s economy from the financial impacts of the Covid-19 pandemic, Prime Minister Justin Trudeau has caused the country’s deficit to soar to the highest among OECD countries. In fact, Canada’s deficit soared to $248.2 billion in the nine months ending on December 31, amounting to a $237.2 billion increase from the same period a year prior. A large part of the borrowing has been the result of numerous income support programs that provided direct payments to consumers and businesses amid the pandemic.
However, according to some critics, the Liberal government may have gone overboard with its bottomless spending— for every dollar of income that was lost, the government spent $20 in household transfer payments. Nonetheless, Freeland defended the extensive spending initiatives, and reassured Canadians that the Liberal government will exercise caution whilst still continuing to keep the taps flowing. “We are constantly, carefully evaluating government spending, government debt, jobs numbers and economic growth,” she said. “We are prudent and we are responsible, but sometimes the greatest danger is not to act and we understand that risk, too.”
Information for this briefing was found via Statistics Canada and the Canadian Press. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.