Canada’s unemployment higher, recession deeper than other industrialized countries, despite comparatively high spending and borrowing

Vancouver—Federal and provincial governments across Canada have spent and borrowed more than many other industrialized high-income countries around the world during the COVID crisis, but Canada’s economic performance lags those other countries, finds a new analysis released today by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank. “What is becoming clear is that the record-high spending that we’ve seen in Ottawa and around the country both before and as a result of the COVID crisis is not translating into better economic performance, and could in fact be a drag on our recovery,” said Jason Clemens, Executive Vice President at the Fraser Institute and co-author of a new blog Canada’s spending and deficits higher than comparable countries during pandemic.

“Canadian governments are spending and borrowing more than most other industrialized countries, while achieving poorer economic performance”

Using newly released data from the International Monetary Fund, the new analysis finds that in 2020, among 35 comparable high-income countries, Canada is forecasted to borrow more (19.9 per cent as a share of GDP) than any other industrialized country—almost double Australia’s ratio, more than twice that of Germany, and triple the ratio of Sweden and Ireland. And as a share of the economy, Canada’s government spending is sixth highest (57.3 per cent), behind only France, Belgium, Finland, Italy and Austria. Crucially, this record-high spending and new debt has not translated into better economic performance. In fact, of the same 35 comparable countries, Canada is expected to experience the 11th worst recession at 7.1 per cent. Conversely, countries that spent less than Canada are expected to experience less severe recessions. Notably, Australia’s contraction is forecasted at 4.2 per cent, the U.S. at 4.3 per cent and Germany at 6.0 per cent. Moreover, Canada is expected to have the 4th highest unemployment rate of any industrialized country in 2020. “Canadian governments are spending and borrowing more than most other industrialized countries, while achieving poorer economic performance,” Clemens said. Media Contact: Jason Clemens, Executive Vice President, Fraser Institute To arrange media interviews or for more information, please contact: Drue MacPherson, Fraser Institute drue.macpherson@fraserinstitute.org