The global health impact of the Covid-19 pandemic has been enormous, but the economic impact has affected many, many more people.
Around the world, governments that can afford them have put in place huge relief packages to deal with the devastating effects. The US, for example, has handed out trillions of dollars and so has the European Union.
Canada, smaller by population, has reached deep into the huge pools of debt at its disposal, spending hundreds of billions of dollars to deal with, among other things, unemployment rates that shot up to 10.9% by July, almost double from a year earlier.
Canada weathers the storm
In health terms, Canada has done relatively well in confronting the virus. By early September, there were globally more than 26 million cases of Covid-19 and almost 900,000 deaths, according to Johns Hopkins University data.
Canada’s totals were almost 132,000 cases and 9,182 deaths – 23 countries had more cases and 16 had more deaths.
Generous benefits, handouts, subsidies for businesses, payment holidays and other support have helped Canadians weather this incredibly difficult time; by mid-August, the federal government had spent more than CA$214bn in subsidies for individuals and businesses. As a result, the country’s debt will balloon to about CA$1.2 trillion this year – from CA$785bn at the end of 2019.
Time to pay
Some might perceive this high level of debt as a bad thing, but in terms of public debt it is not so terrible, or even particularly troubling over the long term. Unlike households, which have a limited time to pay off their debts – 25 years for most mortgages – repayment of government debt can be spread out over many decades.
Moreover, for all the money Ottawa has spent, the country’s debt relative to GDP will be lower at the end of this year than it was two decades ago. Its debt-to-GDP ratio is now 49%, up from 31% a year ago but below the 68% it reached in 1995. And thanks to the magic of government debt financing, the country has plenty of time to pay for it.
Finally, this debt is not bad debt. If a once-in-a-century pandemic that shuts down the global economy is not the time to overspend, when is?
The spending has helped many people who have lost their jobs and organisations that would have been forced to close their doors. This means that many will come out the other side financially stronger than they went into the pandemic. There have been gaps – there always are – but the support has been greater than in many other countries. And it has helped Canada navigate the pandemic with greater aplomb than most other countries.
