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

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Canada’s massive increase 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 saw the second-largest increase in its gross debt as a share of the national economy, surpassed only by Japan.

Heading into the pandemic in 2019, Canada had the 10th highest gross debt-to-GDP ratio of 87.2% among peer countries, but it climbed to second place in 2021 to 112.1%, an increase of 24.9%.

Despite leading its economic peers in debt accumulation, according to the report, Canada has underperformed in economic growth, ranking 23rd out of 33 countries with negative inflation-adjusted growth of 5.2% in 2020, rising only one position to 22nd in 2021.

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

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“Despite Canada’s relatively high debt accumulation during the pandemic, which many believed would lead to strong economic performance, we have actually underperformed most of our peers,” economist Tegan Hill said in the report. study, “Accumulated Debt and Economic Performance of Industrialized Countries During COVID.”

“Interestingly, despite the borrowing of Canadian governments, particularly Ottawa, our recession in 2020 has been deeper and our recovery in 2021 weaker than most other industrialized countries…Clearly, the Canada’s large debt-financed spending has not translated into a strong economy during the pandemic.

The Fraser Institute study follows a Bank of Nova Scotia report to investors that said the Trudeau government’s continued high spending levels are fueling inflation, which is now at its highest level in more than three decades.

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These dire economic warnings run counter to a speech Finance Minister Chrystia Freeland gave last week to the Empire Club in Toronto, touting Canada’s recovery from the pandemic, while acknowledging that the inflation worries Canadians.

“We recovered 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 is now just 5.1% – an all-time high.

“Young people, Indigenous peoples, women and new Canadians have particularly benefited from the strength of the labor 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 weeks.

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

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

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

The 33 countries compared in the Fraser report were Canada, Japan, United States, Spain, New Zealand, Italy, France, Germany, Greece, Australia, Austria , the Slovak Republic, the Czech Republic, the United Kingdom, 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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