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This is not anywhere close to the Japan and United States, with their safe haven currencies, but it is disappointing for a commodity-based economy. Canadian governments should have been running larger fiscal surpluses by using more of our commodity-based revenue to pay down debt, as Australia and Norway did over the past decade and half. On this score, Alberta and Newfoundland have been the biggest offenders.

In part, continuing Canadian deficits have been justified by claims the growth rate in taxes would surpass financing costs for decades to come, so the burden of the debt would not rise. In 2020, that is no longer the case. GDP growth and inflation rates are both expected to be negative and well below government bond rates. The IMF calculates interest rates on Canada bonds will be 5.8 percentage points above the nominal GDP growth rate in 2020, one of the highest gaps among advanced countries.

The good news is that growth should improve in 2021, especially with all the new fiscal and liquidity measures in place. If a vaccine or therapeutic drug is found, economic lockdowns will no longer be required, which will help restore economic confidence. With most of the financial measures being temporary, Canada’s all-government fiscal deficit should plummet to “just” 3.5 per cent of GDP in 2021.

We should hope for that relatively good outcome but also prepare for the worse. The economic upturn will be disappointing if health measures remain in place for some time and they could even tighten again if there is a resurgence in the pandemic in the fall. Moreover, the pandemic has taken hold in emerging and low-income countries, which will also slow global growth.