Morneau insists economy can handle coronavirus as economist urges fiscal caution

Finance Minister Bill Morneau insists the Canadian government is in a good position to respond to economic shocks from the new coronavirus.

But one economist warns his calculations may be taking too “narrow” a view of the situation.

In an interview with The West Block‘s Mercedes Stephenson, Morneau said part of the reason the government feels like it can respond well to what he called the “very real potential challenges” of the coronavirus spread comes from strong employment numbers and its ratio of debt to GDP.

“I think what people need to know is that, you know, we have a strong fiscal position, so we’re prepared in terms of the actual health risks, but we’ve a strong position fiscally so that we can actually take measures as needed as the facts come out,” he said.

“We’re going to be prepared to announce them when and if that comes. The good news, again, is that we have the capacity to do that.”

Morneau also acknowledged last week that officials are changing their risk adjustment provision for the upcoming federal budget in response to COVID-19, which has caused shock waves through financial markets around the world over recent months.

But Brian DePratto, director of economics at TD Bank, urged more caution.

“I think he’s taking a relatively narrow view of the economy,” he said of Morneau’s comments.

DePratto noted that while Morneau is right that Canada is in a better fiscal position than many of its allies, that doesn’t mean it has much in the way of economic wiggle room. As a result, if the government wants to put out new programs to help reduce the impact of the virus, it may need to make changes elsewhere.

“It’s a little bit of a balancing act,” he said.

“They’re going to be doing a pros and cons kind of analysis and we could see some reshuffling of the cards.”

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