Written by Livio Di Matteo, professor of economics at Lakehead University for the Fraser Institute, the article, titled Endless Storm: The Fiscal Impact of COVID-19 on Canada and the Provinces, saw federal spending increase by as much as 73% in 2020/21 to $644. 2 billion.
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This declined in the following fiscal year, falling 21% to $508. 2 billion in 2021/22.
In 2020/21, the report says, federal government debt rose between about 41 and 12. 4 Array to $1. 3 trillion in 2021/22.
“You can say that component of the explanation for why the deficit accumulation was that federal revenues declined during the pandemic and spending increased,” Di Matteo said.
“But if you look at the functionality of federal revenues, they fell about five percent in 2021, but they started to recover dramatically. “
Estimates for 2021/22, which according to Di Matteo have not yet been finalized, recommend an increase of 17%.
Health spending experienced an estimated accumulation of nearly thirteen percent between 2019 and 2020, according to the report, a rate of accumulation, according to Di Matteo, more than triple the established expansion rate of fitness spending since 2015, and an accumulation not noticed in more than 3 decades.
During the pandemic, about 60% of the federal budget deficit was directly similar to the pandemic, basically, whether it’s federal adequacy spending and similar transfers to provinces, as well as revenue source programs.
This, the report says, suggests a permanent build-up in long-term spending.
Projections released last year by the Canadian Institute for Health Information (CIHI) suggest that increased physical activity in the event of a pandemic, which is expected to exceed $308 billion through the end of 2021, could hamper provincial efforts to rebuild its physical care networks. post-COVID.
Dr. Katharine Smart, president of the Canadian Medical Association, told The Canadian Press in November that provincial fitness systems have kept up with those historic increases in fitness care spending, comparing the challenge to an uncontrollable freight train.
But what effect does this have on Canada’s economic future?
An imminent long-term consequence, he said, is the effect on the federal debt.
“You’re looking for a debt-to-GDP ratio that goes from around 33% to 50%, and right now a lot of that is stuck at low interest rates,” he said.
But as this debt begins to reverse and new debt accumulates, this can lead to higher interest rates and an upcoming accrual at the expense of servicing that debt.
While a lot of points translate into higher inflation, higher spending has an impact, Di Matteo said.
“Inflation is also a result of supply chain disruptions, the war in Ukraine and ultra-low interest rates ever-present, so it’s a confusing picture,” he said.
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