Canada’s parliamentary budget officer is warning that this year's federal deficit could reach $256 billion due to the COVID-19 pandemic and weak oil prices.
The latest federal budget deficit projection is due to an estimated $169 billion in federal spending on emergency aid during the COVID-19 pandemic and a historic drop in economic output throughout Canada.
The budget office also estimates that Canada’s economy could shrink by 6.8% in 2020, the weakest showing since 1981 and double the record of 3.2% shrinkage in 1982. Previously, the budget office estimated the economy could shrink by 12% in 2020. But now, the office forecasts a better economic outlook in the second half of the year.
The Liberals have been under pressure from opposition parties to release a fiscal update or a budget that was shelved due to the COVID-19 pandemic. The government had originally planned to release a budget in late March.
Prime Minister Justin Trudeau has said that his government won't provide a budget or long-term economic outlook for the time being because of the uncertainty about where the economy will go in the coming months and years as a result of the pandemic.
The parliamentary budget office also released updated cost estimates for two of the cornerstone programs the Liberal government implemented and is now revamping -- the Canada Emergency Response Benefit (CERB), and the federal wage-subsidy program.
The budget office now estimates the $2,000-a-month CERB will cost the government $61.1 billion but pull in $7.7 billion when recipients are taxed on the income next year. The budget office estimates the wage subsidy will cost the treasury $55.6 billion.
