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There’s a lot of uncertainty right now

“Mechanically, that is going to have some impact on the starting point for the deficit for this year,” said Brian DePratto, senior economist at Toronto Dominion Bank.

Morneau posted a deficit projection of $26.6 billion in December, well above an earlier estimate of $19.8 billion, due to higher spending and accounting charges. According to Finance Canada’s own projections, the federal deficit widens by roughly $4.9 billion for every one per cent drop in GDP.

TD has trimmed back its estimates for the Canadian economy to 1.4 per cent growth over 2020, down from 1.6 per cent earlier this year, reflecting a general consensus among analysts. That deficit could continue to grow if effects from the virus exceed expectations.

“There’s a lot of uncertainty right now, so to the extent that we could see a deeper impact from the coronavirus, that would further weaken that starting point,” he said. He stressed that virus impacts are especially hard to predict.

In 2018-19, Ottawa ran a deficit of $14 billion, slightly lower than it had projected. According to new data published Friday, by comparison, Ottawa was already running an $11-billion deficit over the nine months ended December 2019, well above the $300 million surplus it was running over the same period in 2018.