Federal Deficits and Recession: What Could Happen

Recession could push federal deficit to between $46 and $120 billion by 2020/21

By —— Bio and Archives--February 1, 2018

Canadian News, Politics, Opinion | Comments | Print Friendly | Subscribe | Email Us

Recession could push federal deficit to between $46 and $120 billion by 2020/21
VANCOUVER—With the federal government running deficits during times of positive economic growth, Ottawa’s annual deficit could reach $120 billion in the next few years if Canada enters a recession, finds a new study by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.

“By running deficits in good times, if and when Canada’s economy slows down—or worse, hits a recession—there’s a very real risk Canada’s existing deficits could grow substantially,” said Jason Clemens, executive vice-president of the Fraser Institute and co-author of Federal Deficits and Recession: What Could Happen.

The study analyzes three different economic downturns, and applied the same revenue declines and program spending increases (both automatic and discretionary) to the current government’s finances.

If the economic conditions of the 1991/92 recession—which had a mild impact on federal finances—were repeated now, the 2020/21 federal deficit would increase from its projected $13.8 billion to $46.1 billion.

If conditions similar to the 2000/01 slowdown—which had a moderate impact on federal finances—occurred now, the 2020/21 deficit would reach $64.1 billion.

And if Canada experienced a severe recession, similar to 2008/09, the 2020/21 deficit would hit a staggering $120.5 billion.

“Recessions are inevitable, and the risks to federal finances from even a mild recession, let alone a more severe one, are substantial given Ottawa’s current deficits during times of economic growth,” Clemens said.

“The federal government should consider the very real risk of a future economic downturn when drafting future budgets to mitigate the potential damage of even larger deficits and debt accumulation.”

MEDIA CONTACT: Bryn Weese, Media Relations Specialist, Fraser Institute, .(JavaScript must be enabled to view this email address)


Only YOU can save CFP from Social Media Suppression. Tweet, Post, Forward, Subscribe or Bookmark us

Fraser Institute -- Bio and Archives | Comments

The Fraser Institute is an independent Canadian public policy research and educational organization with offices in Vancouver, Calgary, Toronto, and Montreal and ties to a global network of 86 think-tanks. Its mission is to measure, study, and communicate the impact of competitive markets and government intervention on the welfare of individuals. To protect the Institute’s independence, it does not accept grants from governments or contracts for research. Visit fraserinstitute.org.

Follow the Fraser Institute on Twitter | Like us on Facebook

Commenting Policy

Please adhere to our commenting policy to avoid being banned. As a privately owned website, we reserve the right to remove any comment and ban any user at any time.

Comments that contain spam, advertising, vulgarity, threats of violence and death, racism, anti-Semitism, or personal or abusive attacks on other users may be removed and result in a ban.
-- Follow these instructions on registering: