OTTAWA – Parliament’s budget watchdog predicts the economy will contract by 5.1 per cent this calendar year, the weakest on record since 1962, because of the COVID-19 crisis.
In a report, the Parliamentary Budget Officer also predicts the country’s unemployment rate could rise to 15 per cent in the third quarter as a result of the pandemic.
The report, which was made public Friday morning, projects the federal deficit for the coming fiscal year could be $112.7 billion, a jump of $89.5 billion from previous forecasts as government spending climbs to combat the economic fallout from COVID-19.
It also warns that the deficit for the current fiscal year, which closes March 31, could be $26.7 billion, which would be an increase of $5.5 billion compared to the budget officer’s November forecast.
The projected deficit for the 2020-2021 fiscal year doesn’t include extra spending the Liberals announced on Wednesday in the form of a new benefit for affected workers.
That measure pushed direct spending on the government’s economic bailout package to $52 billion from $27 billion.
Parliamentary budget officer Yves Giroux says in his report that extra stimulus measures may be required to ensure the economy hits “lift-off speed,” especially if consumer and business behaviour does not quickly revert back to “normal” fast enough.