Economic Snapshot 2020: Overview

Finance Minister Bill Morneau presented the federal government’s Economic and Fiscal Snapshot in the House of Commons on Wednesday, July 8, 2020.

This snapshot did not introduce any new government programs or amendments to previously established programs, nor did it provide the legislation needed to implement the previously announced changes to the Canada Emergency Wage Subsidy (CEWS).

What this snapshot did provide is a short-term economic outlook to the end of the federal government’s 2021 fiscal period. As expected, there will be a larger deficit for the fiscal period ending March 31, 2021 than originally projected in the 2019 Fall Economic Update. Approximately 1,300 per cent larger, as the deficit is projected to balloon from $25 billion to $343 billion. This is projected to occur through a combination of a 24 per cent drop in government revenues¹ and a 62 per cent increase in program spending² and debt service charges.³

The current projected short-term effect of the COVID-19 pandemic is a 43 per cent increase in the federal debt – raising the debt from a projected $741.4 billion to a projected $1.060 trillion. The debt to Gross Domestic Product (GDP) ratio is also projected to increase by 18 precentage points ­(from 31 to 49 per cent).

The snapshot did not provide any long-term plans regarding future taxes or spending, leaving entrepreneurs to their own devices to predict the federal government’s long-term fiscal policy. Without a crystal ball to see what the future holds, we can probably expect a slow, gradual economic recovery – followed by an eventual reckoning by the federal government to bring the debt to GDP back in line. This could mean increased taxes, more effective tax collection or decreased spending.

Before we get too far ahead of ourselves, we are still in the midst of a pandemic. Even though things are progressing forward, there are still lots of challenges to overcome. Many federal government programs are currently available to help individuals and businesses transition back into a fully operating economy. Visit our Federal Relief Measures Guide for further details on some of these programs.