The Globe and Mail reports in its Tuesday edition that the federal government is pinning its new "fiscal anchor" to a rapid postpandemic recovery, with economic growth projected to put the government's debt-to-GDP ratio on a downward trajectory over the next few years, despite continuing deficits.
The Globe's Mark Rendell writes that Ottawa added more than $350-billion to its accumulated debt last year, and expects to run another deficit of $154.7-billion this year. Federal debt now stands at $1.08-trillion or 49 per cent of GDP, up from $721-billion or 31.2 per cent before the pandemic.
Heading into Monday's budget, economists and business groups were calling for the government to adopt a fiscal anchor -- that is, a target, such as a debt-to-GDP ratio, to moderate deficit spending and debt accumulation. The feds responded with a loosely defined commitment to unwind its emergency spending and reduce the size of its debt relative to the size of the economy "over the medium term."
BMO chief economist Douglas Porter said these economic projections are reasonable over the medium term, but the outlook, he said, "relies heavily on the economy managing to recover from the pandemic over the next 12 to 18 months."
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