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Even with sizeable corporate supports in place, she said some industries might never climb out of the hole left by economic shutdowns.
“The risk is that the pandemic is inflicting a reallocation shock, in which some firms and even entire sectors suffer lasting damage.”
The Liberal government also needs to begin planning longer term by providing the public with its expectations around vaccines for COVID-19, Cooper said, which could influence its policy response under various scenarios.
“Economic theory and econometric modelling do not provide a specific roadmap,” she said. “The government needs to explain its view on the likelihood of a vaccine, and antivirals, over a six-month, one-year and three-year timeframe.”
Finance Minister Bill Morneau is now scheduled to release a fiscal update on July 8, after delaying his annual budget and refusing for months to provide an interim fiscal update, citing volatility in the markets.
The federal government is expected to run a $256 billion deficit in 2021, according to the report released by the PBO on Thursday. The economy is now expected to shrink by 6.8 per cent in 2020, from an earlier estimate of 12 per cent in April.
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