Fiscal Policy Country Blog


One significant fiscal policy implemented by Canada in recent years was a stimulus bill to combat the negative economic effects of COVID-19. Through this plan, the Canadian government has committed over $212 billion in direct support to Canadians and businesses(Canada, Department of Finance). Another fiscal policy was recently implemented with a similar objective. This policy included a commitment of $85 billion in tax differentials, $5.8 billion in support of health care, and $14 billion to support the safe reopening of the country’s economy. Finance Minister Chrystia Freeland is in favor of both these policies, stating in a prepared budget speech to lawmakers that “We must punch our way out of the COVID recession. That means ensuring lost jobs are recovered as swiftly as possible, and hard-hit businesses rebound quickly.” However, Robert Asselin, the senior vice president of the business council of Canada, is less optimistic about the plan. Asselin says he is unsure of how this policy may affect Canada’s economy in the long term. "The size of spending and the scope and scale, you wonder whether on the implementation side this will really follow through. That's kind of a question mark I have, because there's a capacity issue for the government to deliver all these things with all these injections of new money in so little time, so I'm a bit worried about that."

Canadian Government Debt Securities Liabilities as a Percentage of GDP. Accessed 9/2/21. Wikipedia, https://en.wikipedia.org/wiki/Canadian_public_debt

The historical trend in Canada’s government debt shows that Canada took on almost 95% of its GDP as debt in the ’90s. It then decreased until the financial crisis of 2008, when it shot up to 70%.  In 2019, Canada’s government debt was still well below its peak, so I think taking out more debt was not a bad idea. However, taking on this much debt is unsustainable, and I predict a sharp correction in the government debt once the pandemic cools down. As employment rates rise back to normal and people start going out to stores and restaurants, drastic fiscal measures will no longer be needed to stimulate the economy. This reduction in government spending will cause inflation to slow down. 



Works Cited

Canada, Department of Finance. “Government of Canada.” Overview of Canada's COVID-19 Economic         

    Response Plan - Canada.ca, / Gouvernement Du Canada, 6 Jan. 2021, www.canada.ca/en/department-        

    finance/services/publications/economic-fiscal-snapshot/overview-economic-response-plan.html. 


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