The economic, fiscal and health effects of COVID in

Canada by Maj (ret'd) CORNELIU. CHISU, CD, PMSC, FEC, CET, P. Eng. Former Member of Parliament Pickering-Scarborough East As the COVID-19 pandemic recedes into history, it is important for Canadians and governments in Canada to understand its effects in order to better manage future pandemics. What is really needed,is a sincere and comprehensive after action report, and the study carried out by the Fraser Institute is a promising start. In terms of public health response, Canada performed reasonably by the available international standards, but there is room for improvement. At 103,874 total cases per million population, Canada had the 4th lowest incidence rate among the advanced economies by June 2022. It was 27th in mortality at 1,103 COVID-19 deaths per million population (with Japan the lowest at 248) and had the 7th highest vaccine uptake rate (at 227 vaccinations per 100 population). In addition, however,it had the 3rd highest level of “stringency” in its government responses (e.g. lockdowns) to the pandemic as measured by Oxford University’s COVID-19 Government Response Tracker. In terms of economic effects, out of 40 advanced economies, Canada ranked 29th in estimated real per-capita GDP growth from 2019 to 2022 and second-worst in the G7. During the first pandemic year, Canada had the second-worst employment drop at 5.1 per cent, just ahead of the United States. However, during the rebound in 2021, Canada had the second-highest employment growth. With respect to inflation, in 2021 Canada was mid-ranked (19th highest). However, a high share of Canada’s inflation appears to be linked to demand-side rather than supply-side factors. As well, Canada ranked 9th out of 30 OECD comparator countries for the size of the pandemic increase in housing prices. The pandemic elicited a particularly strong fiscal response in Canada, ranking 25th out of 194 countries with an increase in government spending of 19.7 per cent in 2020—well above the world average of approximately 9 per cent, the G7 average of 13 per cent, and the advanced economies average of nearly 11 per cent. Canada also averaged a 2.2 per cent drop in general government revenue in 2020 according to the International Monetary Fund (IMF); less severe than the average drop for both the IMF advanced economies and the G7. The world saw its negative fiscal balance widen from 3.6 per cent of GDP in 2019 to over 10 per cent in 2020 before starting to decline to under 8 per cent in 2021 to just over 5 per cent in 2022. According to the IMF, Canada saw a negative fiscal balance in 2020 of 11.4 per cent of GDP, with forecasts of 4.7 per cent in 2021 and 2.1 per cent in 2022. As well, Canada saw its gross debt-to-GDP ratio increase by nearly 25 percentage points from 2019 to 2021, the 15th largest increase in the world. It’s worth noting that the increased government debt accumulated during the pandemic in Canada was incurred mainly by the federal rather than provincial governments. In terms of pandemic economic performance, Canada fared poorly in per-capita GDP growth; employment growth was also initially low, though this did improve in 2021. Canada’s success in some aspects of dealing with COVID appears to have come at an exceptionally high economic price, particularly from negative short-term employment effects, weaker per-capita GDP growth and more robust demand-side inflation. Canada’s fiscal response was exceptionally large mostly due to the federal response. In some respects, the ability of Canada to ramp up its fiscal response in time of need reflects its long-term prudent fiscal management and resulting low debt-to-GDP ratio achieved in the decades after the federal fiscal crisis of the 1990s. At the same time, the size of the deficit and fiscal response during the pandemic should not be allowed to become a long-term feature of public finances given the recent rise in interest rates. In particular, this kind of public financing limits the nation’s ability and fiscal flexibility in responding to future events. In view of these important issues brought forward by the Fraser Institute Study, it is more important than ever for the Parliament of Canada to undertake a serious review of Canada’s public finance policies. Such a review is necessary to ensure it can better manage future events of this magnitude and such devastating effects on the country. In other order of facts, it would be necessary that the Parliament of Canada should have a more say in the decisions made by the Bank of Canada, which is more connected to international finances than the direct interests of the country are. I am of the opinion that the study of the effects of the COVID pandemic is most important for the nation than other less important but polically fashionable studies that are in the works duringthis parliamentary session. For the sake of the judicious spending of taxpayers’ money and a better life forfuture generations, this study should be givena high priority. What do you think?