Governments were right to take on debt to deal with the COVID-19 pandemic, according to International Monetary Fund estimates. As for Canada’s public finances, it still looks good, in this respect, compared to other countries.
One of the few developed countries, besides Germany, that recorded an aggregate budget surplus for all major levels of government (federal and territorial) before the health crisis hit the planet, then suddenly saw Canada’s deficit join the developed country average with nearly 11% of output GDP, as reported Wednesday, the International Monetary Fund in its new edition public finance controller.
However, it should resume its place alongside Germany, at the bottom of this ranking, as of this year, with a total deficit equal to 7.5% of its GDP, before falling further to 2.2%. Next year and only. 0.5% in 2023, on track to achieve its first surplus by 2025 at the latest, while the United States (-5.3%), the Eurozone (-1.7%), Japan (-2.1%) or the United Kingdom (-3.1%) It will remain deep in red.
While Canada’s total government debt jumped in one year from the equivalent of 87% of GDP to more than 117%, it was supposed to drop to less than 94% by 2025, well below the average for economies developed (119%), including the United States. (133%). When one takes into account the assets at their disposal, particularly the fact that their public pension plans are fully funded, their net debt was still unrivaled even at the end of 2020, at 34.7% of GDP, well ahead of the average. Developed countries. (88%), the United States (99%) or even Germany (50%). The IMF expects this advantage to continue to expand over the next few years.
Thus, Canadian governments were supposed to finish erasing the impact of the crisis on their net debt within five years, as National Bank economists Warren Lovely and Taylor Schleich note in an analysis. “For Canada, there is still something to be relatively proud of. Understandably, they noted, Canada’s finance minister, Chrystia Freeland, should not have too much difficulty meeting the Liberal government’s goal of maintaining Canada’s advantage among the net debt of the G7 nations.
The advantage of being able to get into debt
The International Monetary Fund noted last week that the ability of governments during the crisis to deploy programs of financial assistance and economic stimulus – even if on credit – was a critical factor in mitigating the shock and preparing for recovery. his chapters public finance controller Unveiled in advance. “Government budget support measures during the COVID-19 pandemic have saved lives and jobs.”
They have not deprived themselves of it, with nearly $17 trillion in financial measures to combat the pandemic that have contributed to raising the global public debt today to $88 trillion, nearly 100% of GDP, and global. Public and private debt at a record 226 trillion in 2020.
However, not all countries have the privilege of having governments able to use such financial resources, even with credit, notes the IMF. In fact, more than 90% of the new public debt accumulated in 2020 came from developed countries and China.
Trends now show that those countries that were able to borrow at low cost will recover from the crisis much faster than all other countries that didn’t have the same financial haven, continues the International Monetary Fund, which says it fears this “large financial gap” is not Translate into permanent damage to the growth potential of the poorest countries.
Watch the video
“Alcohol scholar. Twitter lover. Zombieaholic. Hipster-friendly coffee fanatic.”