Canadian Economy Underperformed Despite Increase in Total Debt: study

·2 min read

A new study has found that Canada experienced the second highest increase in its total debt relative to the size of the economy (GDP) from 2019 to 2021 compared to 33 industrialized countries, behind only Japan.

The study, published by the Fraser Institute, found that from 2019 to 2021, Canada had the second-highest increase in its gross debt as a share of the economy out of 33 countries.

The gross debt-to-GDP ratio increased from 87.2 per cent in 2019 to 112.1 per cent in 2021—an increase of 24.9 percentage points.

The Fraser Institute is an independent Canadian public policy research and educational organization.

Tegan Hill, economist at the Fraser Institute and co-author of the study titled The Accumulated Debt and Economic Performance of Industrialized Countries during COVID, said that despite Canada’s comparatively high debt accumulation during the pandemic, which many argued would result in strong economic performance, it actually underperformed most of the country’s peers.

‘Despite leading our peers in debt accumulation, Canada underperformed when it came to economic growth, ranking 23rd of 33 countries in 2020 with -5.2 per cent growth in the economy (inflation-adjusted) and 22nd in 2021.’

“It’s interesting to note that despite the borrowing by Canadian governments, particularly Ottawa, our recession in 2020 was deeper and our recovery in 2021 weaker than most other industrialized countries,” commented Hill.

Canada’s performance for unemployment was even worse, in 2020 Canada had the third-highest unemployment rate (9.6 per cent) out of 33 industrialized countries, and the eighth-highest unemployment rate (7.4 per cent) in 2021.

Other countries with a marked increase in gross debt relative to the size of their economy, such as the United States, outperformed Canada on both measures.

“Clearly, Canada’s significant debt-financed spending didn’t translate into a comparatively strong economy during the pandemic,” Hill said.

Shazia Nazir, Local Journalism Initiative Reporter, The Milton Reporter, Milton Reporter

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