Parliamentary Budget Officer Yves Giroux says the federal deficit could reach $184.2-billion this year based on the measures announced to date in response to COVID-19.
A deficit of that size for the fiscal year that started April 1 would represent a deficit of 8.5 per cent of GDP.
The figures are contained in a new report released Thursday by Parliament’s spending watchdog. The report cautions that this is an illustrative scenario and is not a forecast of the most likely outcome.
The last time the budgetary deficit was near 8.5 per cent of GDP was in 1984-85.
The PBO report was released on the same morning that Statistics Canada reported more than one million jobs were lost in Canada in March, boosting the unemployment rate to 7.8 per cent.
Finance Minister Bill Morneau cancelled plans to release a March budget because of the economic uncertainty created by the virus. Instead, the federal government has announced a series of policy measures that add up to about $105.5-billion in direct spending. The large spike in unemployment will also cause automatic increases in the cost of automatic support programs like employment insurance.
The government’s most recent fiscal forecasts were released in December, well before the economic impact of COVID-19 was known.
The government’s December update said the federal debt-to-GDP ratio was 31 per cent and would be declining over time.
Thursday’s PBO report says the debt-to-GDP ratio could climb to 41.4 per cent in 2020-21.
“Moreover, after support measures are provided, fiscal stimulus measures may be required to ensure that the economy reaches lift-off speed, especially if consumer and business behaviour does not quickly revert back to ‘normal’ conditions,” the PBO report states. “Recall that prior to the COVID-19 and oil price shocks, the government’s balance sheet was healthy. Further, given credit market access at historically low rates, and looking to historical experience, [this] suggests that the government could undertake additional significant borrowing if required.”
During a news conference in Toronto Wednesday, Mr. Morneau said the government is thinking about how to bring back economic growth following the COVID-19-related shutdowns, but that the main focus for now is to address the short term issues related to workers and businesses.
“We do need to think both about dealing with the urgent and important issues today and about how we get out of this,” he said. “We are starting to think about how we build ourselves back to an economy that’s seeing strength, that’s going to support employment, but right now we’re not at a stage where we’re talking about the policies we might be doing in order to ensure that happens.”
Sign up for the Coronavirus Update newsletter to read the day’s essential coronavirus news, features and explainers written by Globe.