The Parliamentary Budget Office's second analysis of the impact of COVID-19 and oil price shocks suggests Canada will wrack up its largest deficit in history by the end of 2020-2021.
One month after releasing its initial analysis, Thursday's report suggested the federal deficit could balloon to $252.1 billion, or 12.7 per cent of Gross Domestic Product, while the national debt-to-GDP ratio would rise to 48.4 per cent, $962.3 billion.
It also said Canada could have a national unemployment rate of 13.4 per cent in the second quarter of 2020. In the third quarter, that rate could be 11.1 per cent, before falling to 8.9 per cent in the fourth quarter.
That is slightly better than the March report, which said the jobless rate could rise to 15 per cent in the third quarter.
Thursday's paper took into account the $146 billion in various aid packages to support Canadians and businesses during the pandemic. It also assumes oil prices will remain below pre-crisis levels.
"We now assume the current COVID-19 control measures will remain in place in Canada through the spring, and then will be gradually relaxed at a relatively slow pace," read the report.
Real GDP growth could fall 20 per cent in the second quarter, better than the previous estimate of 25 per cent. The third and fourth quarters might rebound as social distancing measures are lifted. Overall, for 2020, the GDP is expected to fall by 12 per cent, the lowest since 1961.
Ottawa will have less revenue. A detailed fiscal scenario suggests revenues will fall from $340.6 billion in 2019-2020, to $280.8-billion one year later. Meanwhile, expenses will increase to $509.7 billion.
"To date, budgetary measures announced by the government are intended to be temporary. Once the budgetary measures expire and the economy recovers, the federal debt-to-GDP ratio should stabilize," said Yves Giroux, the parliamentary budget officer. "If some of the measures are extended or made permanent, the federal debt ratio will keep rising."
The report concluded additional fiscal measures might be required to "ensure that the economy reaches lift-off speed" if consumer behaviour does not revert quickly to pre-emergency levels.
The authors stress the scenario is one of many possible outcomes, and "not a forecast."
