Bond rating agency Finch has fired another shot across the bow of Canada’s economic ship..“The recent announcement for significant additional spending by the Canadian federal government (on pandemic response) will support Canada’s economic recovery but will also widen the deficit, underscoring the risks surrounding future fiscal consolidation and the trajectory of public debt,” said Fitch this week..“While we expect government spending to drop back sharply starting in 2021, a significantly widened deficit will make medium-term consolidation of the general government debt and deficit more challenging.”.In June, citing ‘significant fiscal deterioration in 2020’ Finch downgraded the Justin Trudeau Liberal government’s credit rating to AA+’/Stable.. Defying crackdown, hundreds march against lockdowns in Calgary .“The latest announcements point to continued risks of further deficit widening..“These measures, and the federal government’s $343 billion estimate of the upsized fiscal 2020/2021 deficit announced in the July fiscal snapshot point to a general government deficit above 21 pre cent of GDP in 2020, wider than our 16.1 per cent of GDP estimate at the time of the downgrade..“The gross general government debt to GDP ratio will rise above 120 pre cent of GDP, significantly higher than the ‘AA’ median.”.The warning from Finch comes as Statistics Canada released stark economic news on Friday..Stats Can reported the economy posted its steepest decline on record in the second quarter as the COVID-19 pandemic forced the closure of non-essential businesses and slowed the economy to a crawl..The agency says real gross domestic product contracted at an annualized rate of 38.7 per cent for the three-month period, the worst showing since the start of 2009 at the height of the global financial crisis..Dave Naylor is the News Editor of the Western Standard.dnaylor@westernstandardonline.com.TWITTER: Twitter.com/nobby7694
