Canada needs to apply the brakes to its deficit and debt express before it becomes a runaway train.
The importance of government prioritizing strategic spending cuts and identifying bureaucratic efficiencies is amplified today as global trade uncertainty escalates and warning signs of economic recession heat up.
As the World Bank’s Global Economic Prospects report released earlier this year pointed out, the cost of governments continuing to roll over debt is a recipe for another financial crisis.
High debt levels, it noted, “can limit the ability of governments to provide fiscal stimulus during downturns; and … can weigh on investment and long-term growth, especially at a time when investment momentum is already weak.”
Canada faces major economic challenges today. It continues to grapple with domestic confusion and uncertainty over its ability to develop its energy and natural resource riches, revenue from which is critical to ensuring the country can innovate and diversify.
Meanwhile, forecasts of a decelerating global economy are multiplying.
The World Bank’s projection in June of a weaker-than-expected 2.6% growth in the world economy for 2019 was echoed by the Organization for Economic Co-operation and Development (OECD) in September with predictions of the weakest annual growth rates this year and next since the global economic recession.
The OECD awards Canada a mediocre economic outlook percentage increase of 1.5% in 2019 and 1.6% in 2020. Both are lower than economic outlook projections made in May, because, as the OECD notes, “global trade remains exceptionally weak.”
A recent Oxford Economics research brief, meanwhile, opines that “the worst effects of the industrial and trade sector weakness are yet to pass.”
That should be a huge worry for Canada, which relies heavily on international trade to drive its economy and bankroll government spending commitments.
Spending other people’s money is not hard; balancing budgets, conducting core spending reviews and eliminating politically motivated corporate subsidies is.
Canada needs a federal government willing to do less of the former and more of the latter. Canadians are about to find out if they have one this time around.