A Lakehead University Economics professor isn’t overly concerned for the time being as Canada’s deficit hovers around $252-billion to help Canadians weather COVID-19.
Livio DiMatteo points out the current amount of debt compared to goods and services produced is about 12%, nothing compared to the early 90s when it reached 70%.
“Even during the Great Depression, I think the largest deficit to GDP ratio was about 11%. The Great Depression was quite significant, when there was about three to four years of deficits in a row,” recalls DiMatteo.
The LU prof adds the deficit figure of $252-billion is the largest in Canadian history, which he expects will shoot the debt to GDP ratio to about 50% at the end of this fiscal year.
As for wiping out Canada’s looming $1-trillion debt, DiMatteo doubts that will happen, but expects Ottawa to keep it under control, with a low debt to GDP ratio.
“You never will be able to pay it off, if you think about it. We’ve had a net federal debt for decades. The trick is to make sure it doesn’t continue to rise as a share of GDP,” says DiMatteo.
The LU professor adds its most likely the federal government will raise taxes to climb out of the financial hole, which, according to history, is what governments do.
