Economy

Justin Trudeau’s Covid-19 Spending Becomes Key Lifeline for Canada’s Economy

Read more at www.bloomberg.com

One big takeaway from Canadian economic data released this week has been the extent to which housing is driving the nation’s recovery from the pandemic. Another is how the economy remains heavily reliant on government help.

A look at the national economic account shows that transfers by Prime Minister Justin Trudeau’s government to households and companies remain elevated, even as they come off their peak pandemic levels. Direct spending by governments, too, continues to make a major contribution in an economy where business investment remains well below pre-crisis levels.

The following are some of the numbers that underscore the role the state is playing in Canada’s recovery:

Helping Households

Transfers from the state make up a record share of Canadian incomes

Source: Statistics Canada

Transfers to households from all levels of government actually increased in the first three months of 2021 to C$84 billion ($69 billion), from C$76 billion in the final quarter last year. While below the quarterly peak of C$120 billion in the immediate aftermath of the pandemic, that’s still well above pre-pandemic levels. Over the first 12 months of the pandemic, households received C$370 billion in transfers, versus C$238 billion in the year before the crisis.

Much of that is being hoarded, which to many economists represents a potential source of growth down the line even though it raises questions about whether the assistance was too generous. Canadian households have saved more money in the past 12 months — C$242 billion — than they had in the previous seven years combined.

Backing Business

Government subsidies helped Canadian businesses cope with Covid

Source: Statistics Canada

Business subsidies have been declining since the start of the pandemic, but remain elevated. They were C$15 billion in the first three months of 2021 — about half the levels seen earlier in the crisis but seven times the amount of support given to business in the first three months of 2019. It includes the continued handouts from the government’s marquee Canadian Emergency Wage Subsidy program (CEWS), which has so far deployed C$80 billion in aid.

Read more at www.bloomberg.com

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