GOLDSTEIN: Debt-financed pandemic spending failed to boost economy, report

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Canada’s massive rise in debt levels during the COVID-19 pandemic has failed to boost its economic growth compared to 32 other industrialized countries, according to a new study from the Fraser Institute.

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Using data from the International Monetary Fund, the report says that from 2019 to 2021, Canada had the second largest increase in its gross debt as a share of the national economy, second only to Japan.

Heading into the pandemic in 2019, Canada had the 10th-highest gross debt-to-GDP ratio of 87.2% among comparable countries, but shot up to second-highest in 2021 at 112.1%, an increase of 24.9%.

Despite leading its economic peers in accumulating debt, according to the report, Canada underperformed in economic growth, ranking 23rd of 33 countries with negative 5.2% inflation-adjusted growth in 2020, moving up just one position to 22nd in 2021.

Canada also performed poorly in terms of job creation, with the third highest unemployment rate of 9.6% among 33 industrialized countries in 2020 and the eighth highest unemployment rate of 7.4% in 2021.

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“Despite Canada’s comparatively high debt buildup during the pandemic, which many argued would result in strong economic performance, we actually underperformed most of our peers,” economist Tegan Hill said in the study. , “The Accumulated Debt and Economic Performance of Industrialized Countries During COVID.”

“It is interesting to note that despite loans from Canadian governments, particularly from Ottawa, our recession in 2020 was deeper and our recovery in 2021 weaker than that of most other industrialized countries…Clearly, Canada’s significant debt-financed spending did not translate into a strong economy during the pandemic.”

The Fraser Institute study comes on the heels of a Bank of Nova Scotia report for investors that said Continued high levels of spending by the Trudeau government are fueling inflation, now at its highest level in more than three decades.

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These grim economic warnings fly in the face of a speech Finance Minister Chrystia Freeland delivered at Toronto’s Empire Club last week, touting Canada’s recovery from the pandemic, while acknowledging that inflation worries Canadians. .

“We have brought back 117% of the jobs that were lost during the darkest months of the pandemic, compared to just 96% in the United States,” Freeland said.

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“Instead of persistent unemployment, that rate today is just 5.1%, an all-time low.

“Young people, indigenous peoples, women and new Canadians have particularly benefited from the strong job market.

“This is the strongest jobs recovery in the G7, and Canada’s real GDP is 1.8% higher than it was in those terrible first few weeks.”

Despite this positive news, Freeland acknowledged that Canadians are concerned about inflation and while “there are plenty of jobs and business is booming…it’s also harder for many Canadians to pay their bills at the end of the month.”

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Freeland said the Trudeau government is spending $8.9 billion this year to help older people, renters and low-income workers cope with rising inflation.

The Trudeau government has previously argued that its massive spending programs that began at the start of the pandemic were necessary to support workers who were being laid off due to mandates imposed by the government to reduce the spread of COVID-19.

The 33 countries compared in the Fraser report were Canada, Japan, the US, Spain, New Zealand, Italy, France, Germany, Greece, Australia, Austria, the Slovak Republic, the Czech Republic, the UK, Portugal, Belgium, Estonia, Israel, the Netherlands, Slovenia, Latvia, Iceland, South Korea, Norway, Lithuania, Finland, Singapore, Denmark, Luxembourg, Switzerland, Sweden, Ireland, and Taiwan.

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