Recession could push deficit up to $120 billion by 2020-21: Study
Postmedia News
More from Postmedia News
Published:
February 1, 2018
Updated:
February 1, 2018 8:00 AM EST
The federal deficit could reach $120 billion in the next few years if the country enters a recession, says a study released Thursday.
According to the Fraser Institute’s Federal Deficits and Recession: What Could Happen, a recession could push the federal deficit to between $46 billion and $120 billion by the years 2020-21.
The study’s findings were a result of analysis from three different economic downturns, which were applied to the same revenue declines and spending increases based on the federal government’s current finances.
The downturns applied included:
Economic conditions of the 1991-92 recession
The economic slowdown of 2000-01
Severe recession similar to 2008-09
Applying the conditions from 1991-92, which had a mild impact on finances at the time, the study concluded the federal deficit would increase from $13.8 billion to $46.1 billion.
With conditions from the 2000-01 slowdown, which had a moderate impact on finances, the deficit in 2020-21 would balloon to $64.1 billion.
If the country experienced a similar recession as that in 2008-09, the deficit would reach $120.5 billion.
“By running deficits in good times, if and when Canada’s economy slows down — or worse, hits a recession — there’s a very real risk Canada’s existing deficits could grow substantially,” said Jason Clemens, executive vice-president of the Fraser Institute and the study’s co-author in a release.
“Recessions are inevitable, and the risks to federal finances from even a mild recession, let alone a more severe one, are substantial given Ottawa’s current deficits during times of economic growth.”
Based on the study’s findings, Clemens suggested the federal government should consider a “very real risk of a future economic downturn” when drafting future budgets to minimize any possible damage of larger deficits and accumulation of debt.
Recession could push deficit up to $120 billion by 2020-21: Study | Toronto Sun
Postmedia News
More from Postmedia News
Published:
February 1, 2018
Updated:
February 1, 2018 8:00 AM EST
The federal deficit could reach $120 billion in the next few years if the country enters a recession, says a study released Thursday.
According to the Fraser Institute’s Federal Deficits and Recession: What Could Happen, a recession could push the federal deficit to between $46 billion and $120 billion by the years 2020-21.
The study’s findings were a result of analysis from three different economic downturns, which were applied to the same revenue declines and spending increases based on the federal government’s current finances.
The downturns applied included:
Economic conditions of the 1991-92 recession
The economic slowdown of 2000-01
Severe recession similar to 2008-09
Applying the conditions from 1991-92, which had a mild impact on finances at the time, the study concluded the federal deficit would increase from $13.8 billion to $46.1 billion.
With conditions from the 2000-01 slowdown, which had a moderate impact on finances, the deficit in 2020-21 would balloon to $64.1 billion.
If the country experienced a similar recession as that in 2008-09, the deficit would reach $120.5 billion.
“By running deficits in good times, if and when Canada’s economy slows down — or worse, hits a recession — there’s a very real risk Canada’s existing deficits could grow substantially,” said Jason Clemens, executive vice-president of the Fraser Institute and the study’s co-author in a release.
“Recessions are inevitable, and the risks to federal finances from even a mild recession, let alone a more severe one, are substantial given Ottawa’s current deficits during times of economic growth.”
Based on the study’s findings, Clemens suggested the federal government should consider a “very real risk of a future economic downturn” when drafting future budgets to minimize any possible damage of larger deficits and accumulation of debt.
Recession could push deficit up to $120 billion by 2020-21: Study | Toronto Sun
