Advertisement 1

Canada's soaring deficit may jeopardize its AAA rating, Macquarie says

The federal deficit could rise close to $400 billion as the government extends emergency programs to buffer impact of shutdowns

Article content

Canada’s net debt as proportion of its economy is likely to reach a 20-year high, jeopardizing the country’s top credit rating, according to Macquarie Capital Markets.

The federal deficit could rise close to $400 billion (US$284 billion) as the government extends emergency programs to help buffer the impact of the coronavirus shutdowns, Macquarie analysts David Doyle and Neil Shankar said in a report on Wednesday.

Advertisement 2
Story continues below
Article content

That would push the federal net debt-to-gross domestic product ratio to about 55 per cent, the highest since 1998-99. Add in provincial deficits, and the shortfall rises to about $500 billion, or net debt of 90 per cent of the nation’s output in 2020-21, the analysts estimate.

Article content
Recommended from Editorial
  1. Finance Minister of Canada Bill Morneau
    Ottawa to create bridge financing for big companies, including airlines and energy, that need help in crisis
  2. Prime Minister Justin Trudeau said Friday the federal government's emergency wage-subsidy program will be extended beyond its early-June endpoint.
    COVID-19 wage-subsidy program to be extended beyond June, Trudeau promises
  3. Canada’s problem and solution are one and the same: debt put us into a tough spot, debt must now get us out.
    Debt nation: Canada borrowed itself into a tough spot, now it must borrow its way out of coronavirus crisis

“These figures may catch the eye of rating agencies and could jeopardize Canada’s AAA rating particularly if the economy continues to underperform in 2021 and beyond,” they wrote. They expect that is likely, “given how growth has come almost exclusively from housing and energy over the last decade,” they said.

The budget deficit of Ontario, the world’s largest sub-sovereign debt issuer, will be more than double the latest official government projections as its economy contracts 9 per cent in 2020 from the coronavirus shock, the Financial Accountability Office of Ontario, a provincial fiscal watchdog, said earlier this week.

Quebec, which was running surpluses before the COVID-19 crisis, said it is on track to post a budget deficit between $12 billion and $15 billion and it will need as long as five years to balance its book again, the province’s Finance Minister Eric Girard said Wednesday.

Bloomberg.com

Article content
Comments
You must be logged in to join the discussion or read more comments.
Join the Conversation

Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.

This Week in Flyers