Canada’s economic response to the COVID-19 pandemic has earned praise from the International Monetary Fund, but the global lender also has recommendations for future government spending.
The Canadian government and Bank of Canada’s response to the pandemic was “timely, decisive and well-co-ordinated,” the IMF said in a new report released on Thursday. In particular, the organization said Canada’s economy would have had a “harmful,” “even larger collapse” without emergency benefit spending from the government, and that the Bank of Canada helped avoid major disruptions in financial markets and is striking the right balance on interest rates.
But Canada’s response at both the federal and provincial levels also contributed to a “historically large fiscal deficit,” although the report said Canada’s net public debt is expected to remain low relative to other G7 countries.
“Economic and social restrictions put in place since March 2020 have helped to mitigate the first and the second wave of the virus, but they came at significant cost,” the report said, noting that the economic rebound slowed during the second wave of COVID-19 infections and “Canada still needs to boost its productivity.”
The IMF report suggests Canada should do a broader review of its employment insurance system to address gaps in eligibility after the Canada Emergency Response Benefit ended. CERB and the wage subsidy program had flaws during the initial rollout, the report said, with workers fearing the loss of full CERB payments after earning $1 more than $1,000 per month cap, and the initial thresholds for the wage subsidies became a hurdle for businesses.
“The crisis exposed gaps in Canada’s social safety net that should be addressed,” the report said. “The lessons from the crisis represent an excellent opportunity to review the EI system.”
The report’s authors suggest that Canadian officials could reduce uncertainty for consumers and businesses by tying the expiration of emergency benefits to an automatic trigger like the unemployment rate, instead of arbitrarily announcing the end of such measures.
“Benefits that abruptly expire complicate planning decisions and could increase precautionary saving. This could delay the recovery and ultimately increase fiscal costs. Clear and credible communication of the exit strategy will be key,” the report said.
The report also calls on Canadian banks to help prepare mortgage borrowers for higher interest rates down the road.
“Even well-intended measures — like direct subsidies and tax deductions — can have perverse effects on housing affordability by favouring those that can already afford to buy a house at the long-term disadvantage of those that cannot, thus worsening existing inequalities,” the report’s authors wrote.
This report by The Canadian Press was first published March 18, 2021.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
OTTAWA – Statistics Canada says manufacturing sales in August fell to their lowest level since January 2022 as sales in the primary metal and petroleum and coal product subsectors fell.
The agency says manufacturing sales fell 1.3 per cent to $69.4 billion in August, after rising 1.1 per cent in July.
The drop came as sales in the primary metal subsector dropped 6.4 per cent to $5.3 billion in August, on lower prices and lower volumes.
Sales in the petroleum and coal product subsector fell 3.7 per cent to $7.8 billion in August on lower prices.
Meanwhile, sales of aerospace products and parts rose 7.3 per cent to $2.7 billion in August and wood product sales increased 3.8 per cent to $3.1 billion.
Overall manufacturing sales in constant dollars fell 0.8 per cent in August.
This report by The Canadian Press was first published Oct. 16, 2024.
