The Parliamentary Budget Officer has released new projections for the Federal deficit and debt in the years to come.
Here's what you need to know:
- The deficit for the year is expected to be $328.5bn, down from earlier projections of $343.2bn.
- The federal debt-to-GDP ratio is projected to reach 48.3% by 2022-23, up from 31.3%.
- Economic growth is expected to be higher than previously projected.
Go deeper:
- A key measure of financial sustainability is the debt-to-GDP ratio: how much debt is owed as a share of the country's GDP.
- Canada's debt-to-GDP ratio is still well below its peak of 66% in 1995-96.
- The economic climate is very different now too: interest rates are low, which means the cost of sustaining the Federal debt is as low as its been in decades.
What's next:
- For now, the Parliamentary Budget Officer has said the Federal goverment's finances are sustainable, but "barely."
- A higher debt-to-GDP ratio makes the Fed's finances more vulnerable to economic shocks like a worse-than-expected second wave or a rise in interest rates.
- But reducing spending and paring back emergency support programs during COVID may be even more painful.
