During the pandemic, despite high levels of government spending and debt accumulation, Canada’s economy underperformed compared to most other advanced countries, finds a new study released Thursday by the Fraser Institute, an independent, non-partisan Canadian public policy think-tank.
Among 40 industrialized countries in 2020, Canada had the 5th highest increase in government spending as a share of the economy, and between 2019 and 2021, the 3rd largest increase in its total debt-to-GDP ratio, which means Canada accumulated debt at a higher rate than almost every other advanced country, said the report Global Aftermath: The Economic and Fiscal Effects of COVID in Canada and the World.
The report said that from 2019 to 2022, among the same 40 countries, Canada ranked 29th on per-person GDP growth (a common measure of prosperity), and had the 2nd largest drop in employment in 2020. Canada’s economic performance during the pandemic was in contrast to many other advanced countries—Ireland, for example, actually reduced its government debt (as a share of its economy) while increasing the rate of per-person economic growth more than any other industrialized country.
Livio Di Matteo
“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 Livio Di Matteo, professor of economics at Lakehead University, senior fellow at the Fraser Institute and author of the report.
“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.”
The report said the Canadian fiscal response to the pandemic, particularly during the early phases, appears to have been much larger than that of many other countries at similar levels of income and development.
“In trying to put the pandemic behind us, it is not yet clear whether world governments have learned any clear lessons about how to deal with either a resurgence of COVID-19 or a new pandemic while minimizing disruption to the economy,”said the report.
“The policy implications of these results suggest that there was ultimately no one-size-fits-all successful pandemic response, and all countries appear to have a fair degree of variation in their performance. In the case of Canada, on average it did some things well such as mitigating the impact of COVID especially via high vaccine uptake, but crude mortality rates as well as performance in the long-term care sector suggest room for improvement. In addition, Canada’s success in aspects of dealing with COVID appears to have come at an exceptionally high price shown, particularly, in negative short-term employment effects. The longer-term economic effects, particularly in areas such as housing prices and inflation in general, will need to be studied further. More important in hindsight will be a critical analysis of things where countries did not do as well. Again, in Canada’s case, its weaker performance with respect to its higher overall crude mortality rates as well as the mortality toll in its long-term care sector needs to be carefully reviewed.”
Mario Toneguzzi
(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)
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