July 8, 2020 / 6:41 PM / a month ago

Instant View: Canada to post largest deficit since WWII on COVID-19 spending

TORONTO (Reuters) - Canadian Finance Minister Bill Morneau on Wednesday provided a fiscal update, forecasting the country’s budget deficit to hit C$343.2 billion ($253.4 billion) during fiscal 2020-21, the largest shortfall since the Second World War, due to the emergency spending in response to the COVID-19 pandemic.

FILE PHOTO: A real estate agent disinfects a door handle with wipes during a client's visit to a home for sale, amid the coronavirus disease (COVID-19) outbreak, in Montreal, Quebec, Canada June 5, 2020. REUTERS/Christinne Muschi

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Market reaction: CAD/

LINK: here

COMMENTARY

REBEKAH YOUNG, DIRECTOR, FISCAL & PROVINCIAL ECONOMICS AT SCOTIABANK:

“It (deficit) is slightly higher than had been forecasted by a number of commentators, we were expecting to come out around C$300 billion ($222 billion) or so. But overall not surprised, and this was a (much) needed injection and we’re really looking for plans for the longer term recovery and how consolidation over the medium term will take place.”

“This is reinforcing that the fiscal firepower is not going to be pulling out too quickly, which would leave everything on the side of the Bank of Canada. ... What we are seeing, at least this year, is that fiscal and monetary (policy) are working in tandem.

ANDREW KELVIN, CHIEF CANADA STRATEGIST, TD SECURITIES:

“First impressions it is a bigger deficit than expected. I’m very happy that the Bank of Canada is there to continue to soak up bonds in the secondary market. A little bit of extra fiscal stimulus shouldn’t change the Bank of Canada’s stance on monetary policy.”

Reporting by Jeff Lewis, Moira Warburton; Editing by Denny Thomas

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