City of Surrey 2020-2024 Financial Plan

ECONOMIC OVERVIEW

CANADA Canada has recorded more than 110,000 cases of COVID-19 and over 8,800 deaths with Ontario and Quebec being the hardest-hit provinces. Federal and provincial government lockdown measures and restrictions placed on travel were strict, uniform and widely followed by Canadians which helped lessen the spread of COVID-19. The Bank of Canada (“BOC”), with unprecedented speed and frequency, cut interest rates three times in March resulting in a total reduction of 1.50%. The central bank’s key interest rate is now at a record low of 0.25%. The BOC is expecting inflation to come in at 0.6% this year, rising to 1.2% next year. The BOC’s new governor signalled that there are no plans to alter interest rates until the economy improves and inflation returns to the bank’s 2% target. The central bank reiterated plans to continue its bond buying program to support the credit market. Canada’s unemployment rate fell to 12.3% in June from the May high of 13.7%. After shedding more than three million jobs in March and April, job creation numbers improved. Canada added 289,000 jobs in May and 950,000 jobs in June, with Ontario and Quebec accounting for over 625,000 of those positions. The majority of jobs created were in retail, accommodation and food services which were the first sectors to be shuttered in response to the virus. The economy is expected to improve in the third quarter of this year due to increased business activity. The federal government has implemented various measures to support individuals, families, and businesses. Income assistance is provided to unemployed workers, students, and families. Finance Minister Morneau presented a fiscal snapshot which laid out the effect of pandemic-related support programs. The 2020-21 federal deficit is expected to rise to $343 billion with net federal debt at $1.2 trillion. The federal debt-to-GDP ratio is forecasted at 49% for this fiscal year with GDP projected to shrink by 6.8%. The Finance Minister stated that, without government pandemic programs, the GDP would have contracted by more than 10% and unemployment would have risen by another 2%.

Source: Bank of Canada

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