A new study has found that although the Canadian government had some of the highest government spending on stimulus programs during the Covid-19 pandemic, they achieved some of the worst results among advanced countries.
According to the Fraser Institute study titled “Global Aftermath: The Economic and Fiscal Effects of COVID in Canada and the World,” despite raising its government spending and debt accumulation more than most other advanced countries, Canada’s economy fared relatively poorly during the pandemic.
In 2020, Canada placed 5th out of 40 industrialized countries in growing government spending as a proportion of its economy.
At the same time, between 2019 and 2021, it ranked 3rd in elevating its total debt-to-GDP ratio, which shows that Canada built up debt faster than its competitors.
Researchers also found that Canada was “mid-ranked” when it came to inflation in comparison to the other IMF Advanced Economies.
“While governments across Canada, particularly the federal government, increased spending markedly during COVID, it’s now clear we didn’t get much bang for our buck,” said Lakehead University economics professor and author of the report, Livio Di Matteo in a press release.
“It’s important for governments in Canada to understand the effects of their pandemic responses so they don’t repeat the same ineffective and costly policies in the future.”
Last year, Bank of Canada governor Tiff Macklem admitted in the House of Commons finance committee that the federal government’s decision to continue on with stimulus spending longer than necessary contributed to Canada’s current inflationary troubles.
“If we knew everything a year ago that we knew today, yes I think we should have started tightening interest rates sooner to withdraw the stimulus,” said Macklem.
“(If) there would have been less stimulus in the economy, there would have been less demand, (inflation) would have been less.”
