Canadian government projects deficit of $342 billion for 2020-21

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"The cost of inaction would have been far greater", he said in the prepared text of a speech to the legislature.

"The reality is that we've faced an enormous shock to our system", Finance Minister Bill Morneau says.

"We were able to do this because Canada entered this crisis on strong footing", said Trudeau, who stated that Canada had a net debt to GDP ratio considerably lower than the rest of the G7 (France, Germany, Italy, Japan, the United Kingdom, the United States, and the European Union) when the pandemic hit.

The projection is part of Ottawa's economic fiscal snapshot, which is the first update since the start of the pandemic.

Last autumn, Finance Minister Bill Morneau projected the deficit for the upcoming year would be C$28.1bn - up from a deficit of C$14bn two years ago, before Mr Trudeau's Liberal Party won a second mandate.

Other private sector estimates suggest $300 billion wouldn't be out of the realm of possibility.

This will push Canada's debt to an estimated $1.2 trillion.

Michael White, portfolio manager and head of multi-asset strategy, Picton Mahoney Asset Management says the snapshot is tacit acknowledgement that Canadian consumer debt is an issue.

"This is something that again is a little hard to understand because the U.S. relies heavily on imports of Canadian aluminium, in particular, for their domestic manufacturing capacity", he said.

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"Holistically it is an admirable goal, but again, leaves the medium/long-term solutions open for debate". Direct support to individuals and businesses will total $212 billion this year, driving spending levels to their highest since 1945. As well as up to $85 billion in tax and customs duty payment deferrals to meet liquidity needs of businesses and families.

Trudeau said historically low interest rates will make borrowing costs manageable and allow the government to continue to invest in the economy.

In a statement, official opposition and Conservative Leader Andrew Scheer criticized the government's high spending and lack of a plan to restart the economy.

The Minister says that the federal government has used its strong fiscal position to stabilize the economy and support Canadians by putting in place the largest economic aid package in generations.

The Canadian Federation of Independent Business (CFIB) called the snapshot a missed opportunity to provide certainty for small business owners.

The deficit is largely due to record emergency aid spending to offset the unprecedented impact of the COVID-19 pandemic on Canadians and the Canadian economy, which was virtually shut down to curb the spread of the coronavirus.

"They need assurance that the government is focused on recovery and will be swift in enacting measures that will support them".

"Certainty is a cheap stimulus measure that can help many businesses", president Dan Kelly said in a release.

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