Most Canadian provinces have ‘roared back’ amid disappearing COVID deficits: report

In Ontario and Saskatchewan, deficits will persist for longer because these provinces collect among the least in taxes compared to the size of their economies.

Most Canadian provinces are on track to have their deficits recovered much faster than expected despite massive COVID-related expenditures, according to a new report from the Canadian Centre for Policy Alternatives (CCPA).

The report, Disappearing Act: The state of provincial deficits in Canada, that CCPA senior economist David Macdonald released Thursday, finds that the provinces overall are in better fiscal shape than after the last recession.

Nine out of 10 provinces are paying less interest now, as a proportion of GDP, compared to after the Great Recession in 2009-10, the report showed.

As a result, paying less interest is saving the provinces a combined $6 billion in 2021-22 alone, the report showed.

“The important thing to take away from this is that these deficits are no longer being caused by COVID-19. In fact, the economies have roared back for most provinces,” said Macdonald, the report’s author.

GDP growth in the fourth quarter came in at an annualized rate of 6.7 per cent.

Macdonald also explained that the initial deficit estimates from the provinces at the beginning of the pandemic were far off the mark.

“Provincial cupboards aren’t bare, instead they’ve been stuffed with federal cash through major direct transfers and indirectly through the roaring economic growth federal spending created,” said Macdonald.