Parliamentary Budget Officer Yves Giroux says this year’s federal deficit could reach $256-billion, a figure that does not include the major expansion of the Canada Emergency Response Benefit announced this week by the government.
Parliament’s spending watchdog released his latest assessment of the Canadian economy and federal finances Thursday, one day after Prime Minister Justin Trudeau insisted the economic landscape during the pandemic remains too unstable for Ottawa to release a 2020 federal budget or a full fiscal update.
Instead, Finance Minister Bill Morneau will release an “economic and fiscal snapshot” on July 8 that will include a short-term deficit estimate but not the longer-term projections that are common in full fiscal updates.
Thursday’s report from the PBO updates a report from April 30, which said the deficit could reach $252.1-billion. While the projection has increased only slightly, much has changed in the economic forecast.
In April, the PBO assumed Canada’s gross domestic product would fall 12 per cent in 2020. That forecast has been revised considerably in light of recent data from Statistics Canada. Now the PBO expects GDP to decline by 6.8 per cent this year, which would still be the weakest performance on record based on comparable statistics that date back to 1961.
That revision to GDP added $19.5-billion in revenue to the PBO’s forecast. However, that gain was more than offset by a $24.5-billion increase in projected spending owing to new announcements and revised estimates for previously announced programs.
The increase in spending includes the promise to provide $14.1-billion in transfers to the provinces for a wide range of issues. Several premiers have dismissed the offer as inadequate, and Mr. Trudeau continues to negotiate the amount with the provinces and territories.
The CERB, which is the largest federal program created in response to the pandemic, provides $2,000 a month to people who cannot work for reasons related to COVID-19.
On Tuesday, the government announced that the maximum period for receiving benefits will be increased from 16 weeks to 24.
Prior to that announcement, the government said the CERB would cost $60-billion; it did not announce a specific cost estimate for the extension of the program. However, Employment Minister Carla Qualtrough said this week that the two-month extension should cost less than $34-billion.
The PBO report cautions that its figures outline “one of many possible outcomes” and the report is not a forecast of the most likely. The report includes government announcements up until June 12.
The government has not released a deficit forecast since December. At that time, this year’s deficit was estimated to be $28.1-billion.
Know what is happening in the halls of power with the day’s top political headlines and commentary as selected by Globe editors (subscribers only). Sign up today.