Question Period Note: PBO - March 2021 Pre-Budget Outlook

• Today, the Parliamentary Budget Officer (PBO) released his March 2021 Pre-Budget Outlook.

"• The PBO has revised up his outlook for real GDP growth in 2021 and 2022 on stronger-than-expected recovery in part due to the faster rollout of vaccination against COVID-19.
• Still, a long road lies ahead to full recovery, and bold action continues to be necessary to fight COVID-19 and support people and businesses weather the remainder of this crisis.
• As Canada recovers from COVID-19’s impact, the government’s economic and fiscal strategy will allow flexibility in response to changing health and economic conditions over the short-to-medium term while delivering stronger growth and helping ensure the sustainability of public finances over the longer term.
• The Government will provide a revised economic and fiscal outlook in Budget 2021 on April 19.
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"IN-BRIEF
• The PBO expects real GDP to rebound from a contraction of 5.4% in 2020 to growth of 5.6% in 2021 (revised up 0.9 p.p. from its September 2020 outlook) and 3.7% in 2022 (revised up 0.9 p.p.).
• The PBO expects the level of nominal GDP to be about $75 billion higher on average per year compared to the Fall Economic Statement outlook.
• The PBO projects that almost all of the ground lost in the labour market due to the pandemic will be made up by the end of 2021-22. In that context, the PBO argues that the timing and magnitude of the stimulus package outlined in the Fall Economic Statement may be mis-calibrated.
• Consistent with the improved economic outlook, the PBO’s is projecting smaller deficits over the forecast horizon relative to the government’s Fall Economic Statement.
• PBO projects a deficit of $363.4 billion in 2020-21, improving to $121.1 billion by 2021-22 and further to $19.2 billion by 2025-26. The PBO’s outlook does not include a provision for potential stimulus measures of between $70 and $100 billion announced in the Fall Economic Statement.
• The PBO projects that the federal debt-to-GDP ratio will peak at 49.8 per cent in 2021-22, before declining to 45.8 per cent by 2025-26.
• The PBO also notes that, because of low interest rates, the cost of servicing the federal debt remains at historically low levels.
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