Amid surging second coronavirus wave, Canada to unveil more spending

Julie Gordon
·2 min read

By Julie Gordon

OTTAWA, Nov 30 (Reuters) - Canada on Monday will unveil new spending plans and detail the cost of its emergency support measures as a harsh second wave of COVID-19 infections forces renewed health restrictions across the country.

The so-called Fall Economic Statement will be the first fiscal planning document drafted by Finance Minister Chrystia Freeland, who took over the role in August. Canada did not draft a budget this year due to uncertainty caused by the pandemic.

The document will include initial investments on green stimulus measures and there will be a "down payment" on a national childcare plan announced in September, sources said last week.

It is also expected to include new COVID-19 relief measures for hard-hit sectors. Freeland will plot what the government considers a sustainable path forward, focusing investments that are most likely to spur growth, sources said.

However, the ongoing emergency spending will likely mean a higher deficit than the C$343.2 billion ($264.4 billion) forecast in July.

"We don't really know what the take-up on the new aid programs is thus far," said Benjamin Reitzes, Canadian rates and macro strategist at BMO Economics.

Canada is in the middle of a severe second coronavirus wave with the seven-day rolling average of new cases well over 5,000 despite clamp downs.

But an economic rebound over the summer and recent promising vaccine news has brightened the medium-term outlook, and economists expect bigger stimulus spending will come in the 2021/22 budget due to be published during the first few months of next year.

The government "is in a good position. (It) can spend more before raising alarm bells," said Rebekah Young, director of fiscal and provincial economics at Scotiabank. "If they table a trajectory of debt going up and up, that could create some concerns, particularly from rating agencies." ($1 = 1.2981 Canadian dollars) (Reporting by Julie Gordon in Ottawa; editing by Steve Scherer and Leslie Adler)