MNI POLICY: Canada Budget March 30 May Lift Deficit Amid Virus

By Greg Quinn

     OTTAWA (MNI) - Canadian Finance Minister Bill Morneau said Wednesday he

will present a budget on March 30, hours after adding another CAD1 billion of

deficit spending in an opening bid to shield the country from coronavirus

damage. 

     Morneau told Parliament the budget due at 4pm on the second-to-last day of

Canada's fiscal year will reflect the fiscal power of a country with a low level

of debt and emerging risks to the economy. 

     "That fiscal position is so important for our ability to deal with

challenges, real challenges that Canadians recognize that we are facing in the

economy today," Morneau said. 

     Government bond yields have hit record lows as global investors assess that

COVID-19 may trigger a recession even as the Bank of Canada and Fed slashed

interest rates to sustain demand. Morneau and Prime Minister Justin Trudeau

earlier Wednesday said they will pull out all the stops to protect workers and

keep business credit flowing as health authorities get a handle on the outbreak.

     Canada is a rare country with triple-A credit ratings and Morneau has

touted he has room if needed with the federal debt at around 30% of GDP. On

March 6 Morneau said Canada has the most fiscal firepower among G7 nations and

his budget will focus on coronavirus costs. Morneau has also said the fiscal

plan will boost the extra money set aside to cover unexpected costs. 

     There is no sign that corporate credit is in distress, Morneau said earlier

Wednesday when announcing the CAD1 billion virus package, citing daily

conversations with private banks. Government officials also pledged to ramp up

special lending from its business development agencies if needed.

     The economy could use the help. Growth slowed to a 0.3% annual pace in the

fourth quarter before the outbreak began and the BOC says the slowdown may

persist through the second quarter of this year. Canada has confirmed 93 cases

of the virus and one death. 

     Morneau had already boosted the deficit for the fiscal year ending March 31

to CAD26.6 billion from CAD19.8 billion on employee pension costs, and to

CAD28.1 billion for fiscal 2020-21.

--MNI Ottawa Bureau; +1 613-314-9647; email: greg.quinn@marketnews.com

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