July 29, 2021
Ottawa’s Gamble on Canada’s Fiscal Future
- The federal debt-to-GDP ratio could easily rise above current peak levels associated with the pandemic. Only small changes in assumptions of economic growth and interest rates can significantly alter the course of the projected debt burden.
- Authors Alexandre Laurin and Don Drummond explore the sensitivity and fragility of Canada’s fiscal prospects by testing Canada’s future simulated debt burden under alternative scenarios.
- The authors’ baseline scenario shows the federal and provincial debt burdens on an upward long-run drift with the federal debt ratio rising from 51 percent of GDP in 2021 to reach 60 percent by 2055, and the combined federal and provincial net debt ratio possibly reaching over 140 percent by 2055.