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Annex 1
Details of Economic and Fiscal Projections

Economic Projections

The average of private sector forecasts has been used as the basis for fiscal planning since 1994. This helps ensure objectivity and transparency, and introduces an element of independence into the government’s fiscal forecast. The Department of Finance Canada regularly surveys private sector economists on their views on the outlook for the Canadian economy. The economic forecast presented in this section is based on a survey conducted in September 2020.

The September survey includes the views of 13 private sector economists:

  1. BMO Capital Markets,  
  2. Caisse de dépôt et placement du Québec,
  3. Canadian Federation of Independent Business,
  4. CIBC World Markets,
  5. Desjardins,
  6. IHS Markit,
  7. Industrial Alliance Insurance and Financial Services Inc.,
  8. Laurentian Bank Securities,
  9. National Bank Financial Markets,
  10. Royal Bank of Canada,
  11. Scotiabank,
  12. TD Bank Financial Group, and
  13. The University of Toronto (Policy and Economic Analysis Program).

Private sector economists expect real gross domestic product (GDP) to decline by 5.8 per cent in 2020, a smaller decline than the projected drop of 6.8 per cent in the July 2020 Economic and Fiscal Snapshot (EFS 2020), reflecting slightly better-than-expected results in the second quarter and stronger momentum in the third quarter (Table A1.1 below). The Canadian economy is expected to continue to recover in 2021, rebounding by 4.8 per cent in 2021. This is revised down from 5.5 per cent in EFS 2020 due to ongoing weakness heading into 2021 as a result of ongoing challenges associated with COVID-19. Real GDP growth is expected to gradually decline over the remaining years of the forecast horizon.

Along with the contraction in economic activity, the unemployment rate is expected to rise to reach close to 10 per cent on average in 2020 and to decline to 8.1 per cent in 2021, still above its pre-COVID-19 level and broadly similar to the EFS 2020 forecast.

The outlook for GDP inflation (the broadest measure of economy-wide price inflation) in the September 2020 survey has also been revised up for 2020 compared to the EFS 2020 forecast (from -0.5 per cent to +0.3 per cent) as a result of better-than-expected results in the second quarter and upward forecast revisions in the third quarter, in part attributable to higher oil prices. Going forward, GDP inflation is expected to stand at about 2 per cent per year.

As a result of these developments, the level of nominal GDP (the broadest measure of the tax base) is projected at $2,183 billion for 2020, $39 billion higher than projected in EFS 2020 (but still $214 billion lower than projected in the Economic and Fiscal Update 2019). The nominal GDP level difference with EFS 2020 is expected to be reduced by half to $21 billion in 2021, reflecting a smaller projected rebound in nominal GDP next year.

The outlook for short- and long-term interest rates has been revised down in the September 2020 survey by about 10 basis points both this year and next year compared to the EFS 2020 forecast. Short- and long-term interest rates are expected to average low levels of 0.7 per cent and 1.5 per cent, respectively, over the forecast horizon.

Table A1.1
Average Private Sector Forecasts
per cent, unless otherwise indicated
  2020 2021 2022 2023 2024 2025 2020-
2025
Real GDP growth1
Economic and Fiscal Update 2019
1.6 1.8 1.8 1.9 1.9 --- ---
Economic and Fiscal Snapshot 2020
-6.8 5.5 --- --- --- --- ---
Fall Economic Statement 2020
-5.8 4.8 3.2 2.3 2.1 1.9 1.4
GDP inflation1
Economic and Fiscal Update 2019
2.0 2.0 2.0 2.0 2.0 --- ---
Economic and Fiscal Snapshot 2020
-0.5 2.2 --- --- --- --- ---
Fall Economic Statement 2020
0.3 2.0 2.0 2.0 2.1 2.1 1.8
Nominal GDP growth1
Economic and Fiscal Update 2019
3.7 3.8 3.8 3.9 3.9 --- ---
Economic and Fiscal Snapshot 2020
-7.2 7.9 --- --- --- --- ---
Fall Economic Statement 2020
-5.5 6.9 5.3 4.4 4.3 4.0 3.2
Nominal GDP level (billions of dollars)1
Economic and Fiscal Update 2019
2,398 2,489 2,584 2,685 2,789 --- ---
Economic and Fiscal Snapshot 2020
2,144 2,313 --- --- --- --- ---
Fall Economic Statement 2020
2,183 2,333 2,458 2,565 2,675 2,781 ---
Difference between Economic and Fiscal Update 2019 and Fall Economic Statement 2020
-214 -155 -127 -120 -115 --- ---
Difference between Economic and Fiscal Snapshot 2020 and Fall Economic Statement 2020
39 21 --- --- --- --- ---
3-month treasury bill rate
Economic and Fiscal Update 2019
1.5 1.6 1.9 2.2 2.4 --- ---
Economic and Fiscal Snapshot 2020
0.5 0.3 --- --- --- --- ---
Fall Economic Statement 2020
0.4 0.2 0.3 0.5 1.1 1.5 0.7
10-year government bond rate
Economic and Fiscal Update 2019
1.6 2.0 2.4 2.7 3.0 --- ---
Economic and Fiscal Snapshot 2020
0.8 1.0 --- --- --- --- ---
Fall Economic Statement 2020
0.7 0.9 1.2 1.6 2.0 2.4 1.5
Exchange rate (US cents/C$)
Economic and Fiscal Update 2019
76.2 76.6 77.4 78.1 79.3 --- ---
Economic and Fiscal Snapshot 2020
72.4 73.8 --- --- --- --- ---
Fall Economic Statement 2020
74.2 76.1 76.6 77.9 78.9 79.2 77.2
Unemployment rate
Economic and Fiscal Update 2019
5.8 5.8 5.8 5.8 5.8 --- ---
Economic and Fiscal Snapshot 2020
9.8 7.8 --- --- --- --- ---
Fall Economic Statement 2020
9.7 8.1 7.0 6.3 6.0 6.0 7.2
Consumer Price Index inflation
Economic and Fiscal Update 2019
2.0 1.9 2.0 2.0 2.0 --- ---
Economic and Fiscal Snapshot 2020
0.5 2.0 --- --- --- --- ---
Fall Economic Statement 2020
0.7 1.7 1.9 2.0 2.1 2.1 1.7
U.S. real GDP growth
Economic and Fiscal Update 2019
1.8 1.8 1.8 1.8 1.9 --- ---
Economic and Fiscal Snapshot 2020
-5.6 5.3 --- --- --- --- ---
Fall Economic Statement 2020
-4.3 3.7 3.3 2.6 2.2 2.0 1.6
West Texas Intermediate crude oil price ($US per barrel)
Economic and Fiscal Update 2019
57 58 62 64 65 --- ---
Economic and Fiscal Snapshot 2020
32 43 --- --- --- --- ---
Fall Economic Statement 2020
39 46 52 54 58 59 51
Note: Forecast averages may not equal average of years due to rounding.
1 Figures have been restated to reflect the historical revisions in the Canadian System of National Accounts.
Sources: Statistics Canada; for the Economic and Fiscal Update 2019, Department of Finance Canada September 2019 survey of private sector economists; for the Economic and Fiscal Snapshot 2020, Department of Finance Canada May 2020 survey of private sector economists; for the Fall Economic Statement 2020, Department of Finance Canada September 2020 survey of private sector economists.

Alternative Economic Scenarios

Given the uncertainty of the current environment, with a virulent resurgence of COVID-19 in Canada and around the globe since the September survey, the Department has also considered two alternative downside scenarios to the projections of the private sector survey, described in detail in section 4.3.1. These scenarios broadly illustrate the economic impacts of different health outcomes (Table A1.2).

Table A1.2
Department of Finance Alternative Scenarios
per cent, unless otherwise indicated
  2020Q3 2020Q4 2021Q1 2021Q2 2020 2021 2022
Real GDP growth1
Fall Economic Statement 2020
42.8 5.1 4.6 3.0 -5.8 4.8 3.2
Scenario: Extended Restrictions
47.5 4.6 2.0 2.3 -5.5 4.1 2.9
Scenario: Escalated Restrictions
47.5 2.6 -2.6 3.5 -5.6 2.9 3.1
GDP inflation1
Fall Economic Statement 2020
4.9 2.2 2.1 2.1 0.3 2.0 2.0
Scenario: Extended Restrictions
4.9 0.8 2.2 2.2 0.2 1.8 2.1
Scenario: Escalated Restrictions
4.9 0.7 1.8 2.4 0.2 1.7 2.1
Nominal GDP growth1
Fall Economic Statement 2020
49.8 7.4 6.8 5.2 -5.5 6.9 5.3
Scenario: Extended Restrictions
54.8 5.4 4.2 4.5 -5.2 6.0 5.1
Scenario: Escalated Restrictions
54.8 3.3 -0.8 5.9 -5.4 4.7 5.3
Nominal GDP level (billions of dollars)1
Fall Economic Statement 2020
        2,183 2,333 2,458
Scenario: Extended Restrictions
        2,190 2,321 2,438
Scenario: Escalated Restrictions
        2,187 2,289 2,410
Difference between Fall Economic Statement 2020 and Scenario: Extended Restrictions
        6 -12 -19
Difference between Fall Economic Statement 2020 and Scenario: Escalated Restrictions
        4 -45 -48
Unemployment rate
Fall Economic Statement 2020
10.3 9.1 8.6 8.3 9.7 8.1 7.0
Scenario: Extended Restrictions
10.0 9.0 8.9 8.6 9.6 8.5 7.6
Scenario: Escalated Restrictions
10.0 9.2 9.6 9.0 9.6 8.9 7.9
Note: Forecast averages may not equal average of years due to rounding.
1 Figures have been restated to reflect the historical revisions in the Canadian System of National Accounts.
Sources: Statistics Canada; for the Fall Economic Statement 2020, Department of Finance Canada September 2020 survey of private sector economists; Department of Finance Canada calculations.

Fiscal Projections

Changes to the Fiscal Outlook since the Economic and Fiscal Snapshot 2020 (EFS 2020)

Table A1.3
Economic and Fiscal Developments since EFS 2020 and Policy Actions and Investments
billions of dollars
  2019-
2020 
2020-
2021 
2021-2022  2022-2023  2023-2024  2024-2025  2025-2026 
Budgetary balance – EFS 2020 -34.4 -343.2          
Economic and fiscal developments since EFS 2020 (Table A1.4) -5.9 14.2          
Re-estimates of COVID measures included in EFS 2020 0.9 27.0          
Budgetary balance before policy actions and investments -39.4 -302.0          
Policy Actions since EFS 2020              
Fighting COVID-19
  -17.5 -6.5 -0.3 -0.2 -0.1 -0.1
Supporting Canadians through the Pandemic
  -34.3 -16.9 -0.7 -0.1 0.0 0.0
Building Back Better
  -0.1 -0.3 -0.3 -0.4 -0.5 -0.4
A Prudent Fiscal Plan
  - - - - - -
Other Policy Actions since EFS 2020
  -2.6 -5.8 -0.8 -0.5 0.3 0.5
Subtotal
  -54.5 -29.5 -2.2 -1.2 -0.3 0.0
Investments in the Fall Economic Statement 2020
Fighting COVID-19
  -3.6 -4.0 -0.3 -0.1 0.0 0.0
Supporting Canadians through the Pandemic
  -18.9 -17.9 -0.9 -0.4 -0.3 -0.2
Building Back Better
  -2.3 -5.4 -1.3 -1.8 -1.8 -1.0
A Prudent Fiscal Plan
  -0.2 0.6 1.4 1.7 1.8 2.0
Subtotal
  -25.1 -26.6 -1.1 -0.6 -0.3 0.9
Budgetary balance – FES 2020 -39.4 -381.6 -121.2 -50.7 -43.3 -30.9 -24.9
Of which: COVID-19 economic response plan
-7.2 -275.2 -50.6 -3.8 -1.2 -0.1 -0.4
Note: Planned stimulus spending     $70-to-$100 billion over 3 years    
Budgetary balance before planned stimulus (per cent of GDP) -1.7 -17.5 -5.2 -2.1 -1.7 -1.2 -0.9
Federal debt before planned stimulus (per cent of GDP) 31.2 50.7 52.6 52.1 51.6 50.6 49.6

Economic and Fiscal Developments since EFS 2020

Table A1.4
Economic and Fiscal Developments since EFS 2020  
billions of dollars
    Projection
  2019–
2020  
2020–
2021  
Economic and fiscal developments by component1:    
Change in budgetary revenues    
(1.1) Income taxes
-2.4 17.4
(1.2) Excise taxes/duties
-1.7 -2.3
(1.3) Proceeds from the pollution pricing framework
0.2 -0.1
(1.4) Employment Insurance premiums
-0.6 1.5
(1.5) Other revenues
-2.8 -5.2
(1) Total budgetary revenues
-7.3 11.4
Change in program expenses    
(2.1) Major transfers to persons
0.1 1.0
(2.2) Major transfers to other levels of government
0.0 0.8
(2.3) Direct program expenses2
1.1 2.3
(2) Total program expenses, excluding net actuarial losses 1.2 4.1
(3) Net actuarial losses 0.2 -0.5
(4) Public debt charges 0.1 -0.7
(5) Total economic and fiscal developments -5.9 14.2
Note: Totals may not add due to rounding.
1 A negative number implies a deterioration in the budgetary balance (lower revenues or higher expenses). A positive number implies an improvement in the budgetary balance (higher revenues or lower expenses).
2 Amounts represent the impact of developments before measures – i.e. does not include the impact of measures announced since the Economic and Fiscal Snapshot 2020 or cost adjustments of COVID measures included in the Economic and Fiscal Snapshot 2020. 

Due to the unprecedented severity and suddenness of the economic shock, the fiscal outlook for 2020-21 and beyond is subject to a much higher degree of uncertainty than normal.

Relative to EFS 2020, budgetary revenues are projected to be higher in 2020-21 largely due to better-than-expected income tax revenue. This improvement has been driven by an upward revision to personal income tax revenues due to improved economic conditions, which have resulted in a more positive outlook for household incomes, and the distributional effect of the downturn having a greater relative impact on lower income tax brackets.

Excise taxes and import duties have been revised downward, mainly due to the carry-forward of lower-than-expected revenues for 2019-20, particularly with respect to Goods and Services Tax (GST) revenues.

Proceeds from the pollution pricing framework are projected to be marginally lower as a result of expected lower demand for greenhouse gas-intensive fuel products due to COVID-19.

Employment Insurance (EI) premium revenues have been revised up due to better-than-expected labour force participation and an improved outlook for wages.

Other revenues, such as those resulting from sales of goods and services, investments and loans, interest and penalties, and Crown corporations’ net profits, are projected to be much lower in 2020-21, particularly reflecting lower-than-expected Bank of Canada profits as a result of the secondary market purchases of Government of Canada securities to support liquidity in financial markets. The decrease in Bank of Canada profits reflects the expensing of premiums paid on these bond purchases, which more than offsets interest earnings on the securities in 2020-21.

Relative to EFS 2020, budgetary expenses are projected to be somewhat lower in 2020-21, largely due to the better-than-expected rebound in the labour market and lower projected non-COVID-related discretionary spending.

Major transfers to persons, before measures, have been revised down in 2020-21 relative to EFS 2020, primarily driven by lower-than-expected EI beneficiaries reflecting a stronger rebound in the labour market.

Major transfers to other levels of government are lower in 2020-21, relative to the EFS 2020 forecast, as higher-than-expected personal income tax revenues translate into higher amounts to be recovered through the Quebec Abatement.

Direct program expenses – which include pollution pricing proceeds returned, other transfer payments administered by departments, and operating expenses – have been revised down in 2020-21, due in part to a higher expected lapse of underlying departmental spending resulting from reduced discretionary spending on activities such as travel and training due to the COVID crisis. In addition, the improved outlook for household incomes has resulted in somewhat lower projected refundable tax credits expenses.

Net actuarial losses – which represent changes in the measurement of the government’s obligations for pensions and other employee future benefits accrued in previous fiscal years – are expected to increase relative to EFS 2020, reflecting higher-than-expected actuarial losses at the end of 2019-20.

Public debt charges are up slightly in 2020-21 relative to EFS 2020, reflecting higher interest costs on public sector pension and other future benefit plans due to the upward revision of the associated obligation in 2019-20.

Summary Statement of Transactions

Table A1.5 summarizes the government’s projected financial position over the forecast horizon. These projections are based on the average private sector forecast for the economy discussed above.

This outlook includes the COVID-19 Economic Response Plan and policy actions taken since EFS 2020.

Table A1.5
Summary Statement of Transactions
billions of dollars
    Projection
  2019–
2020  
2020–
2021  
2021–
2022  
2022–
2023  
2023–
2024  
2024–
2025  
2025–
2026  
Budgetary revenues 334.1 275.4 335.9 357.8 377.3 398.5 417.3
Program expenses, excluding net actuarial losses 338.5 621.4 421.2 373.9 384.4 392.9 404.0
Public debt charges 24.4 20.2 20.3 22.4 25.7 30.5 34.3
Total expenses, excluding net actuarial losses 362.9 641.6 441.5 396.4 410.1 423.4 438.4
Budgetary balance before net actuarial losses and stimulus -28.8 -366.2 -105.6 -38.6 -32.8 -24.9 -21.0
Net actuarial losses -10.6 -15.4 -15.6 -12.1 -10.5 -6.0 -3.9
Budgetary balance before stimulus -39.4 -381.6 -121.2 -50.7 -43.3 -30.9 -24.9
Planned Stimulus     $70-to-$100 billion over 3 years    
Financial position before planned stimulus          
Total liabilities
1,248.6 1,705.3 1,840.5 1,879.5 1,936.8 1,981.1 2,017.5
Financial assets1
435.7 501.0 509.8 493.4 503.7 514.3 523.4
Net debt
812.9 1,204.3 1,330.7 1,386.0 1,433.1 1,466.8 1,494.2
Non-financial assets
91.5 97.0 102.2 106.8 110.5 113.4 115.9
Federal debt before planned stimulus 721.4 1,107.4 1,228.5 1,279.3 1,322.6 1,353.4 1,378.3
Per cent of GDP before planned stimulus            
Budgetary revenues
14.5 12.6 14.4 14.6 14.7 14.9 15.0
Program expenses
14.6 28.5 18.1 15.2 15.0 14.7 14.5
Public debt charges
1.1 0.9 0.9 0.9 1.0 1.1 1.2
Budgetary balance
-1.7 -17.5 -5.2 -2.1 -1.7 -1.2 -0.9
Federal debt
31.2 50.7 52.6 52.1 51.6 50.6 49.6
1 The projected level of financial assets for 2020-21 includes an estimate of other comprehensive income

Outlook for Budgetary Revenues

Table A1.6
The Revenue Outlook
billions of dollars
    Projection
  2019–
2020  
2020–
2021  
2021–
2022  
2022–
2023  
2023–
2024  
2024–
2025  
2025–
2026  
Income taxes              
Personal income tax
167.6 162.1 172.1 179.3 187.5 196.1 205.7
Corporate income tax
50.1 39.2 44.3 48.4 52.7 57.3 60.8
Non-resident income tax
9.5 9.9 10.0 10.1 10.3 10.5 11.0
Total income tax
227.1 211.1 226.5 237.8 250.5 263.9 277.5
Excise taxes/duties              
Goods and Services Tax
37.4 29.4 38.9 41.9 44.0 45.8 47.7
Customs import duties
4.9 3.7 4.4 4.7 4.9 5.3 5.6
Other excise taxes/duties
11.6 10.8 11.9 12.1 12.3 12.4 12.5
Total excise taxes/duties
53.9 43.8 55.2 58.7 61.2 63.4 65.7
Total tax revenues 281.0 255.0 281.7 296.5 311.7 327.3 343.2
Proceeds from the pollution pricing framework1 2.7 4.3 6.0 7.6 7.6 7.6 7.6
Employment Insurance premium revenues 22.2 21.5 23.0 24.3 26.4 28.5 30.1
Other revenues              
Enterprise Crown corporations
5.1 -20.3 5.4 8.4 9.1 10.4 10.6
Other programs
20.8 13.6 18.9 19.6 20.8 22.4 23.3
Net foreign exchange
2.4 1.4 1.0 1.3 1.8 2.3 2.6
Total other revenues
28.3 -5.3 25.3 29.3 31.7 35.1 36.5
Total budgetary revenues 334.1 275.4 335.9 357.8 377.3 398.5 417.3
Per cent of GDP              
Total tax revenues 12.2 11.7 12.1 12.1 12.1 12.2 12.3
Proceeds from the pollution pricing framework 0.1 0.2 0.3 0.3 0.3 0.3 0.3
Employment Insurance premium revenues 1.0 1.0 1.0 1.0 1.0 1.1 1.1
Other revenues 1.2 -0.2 1.1 1.2 1.2 1.3 1.3
Total budgetary revenues 14.5 12.6 14.4 14.6 14.7 14.9 15.0
Note: Totals may not add due to rounding.
1 This represents those charges applied through the federal backstop, excluding the Output Based Pricing System. All these proceeds will be returned to their province/territory of origin through Climate Action Incentive payments and other climate supports.

Table A1.6 sets out the government’s projection for budgetary revenues.

Personal income tax (PIT) revenues – the largest component of budgetary revenues – are projected to decrease to $162.1 billion in 2020-21, or 3.3 per cent. This decline reflects the impact of the COVID-19 crisis on household incomes, partially offset by the expansion of government transfers. Over the remainder of the forecast horizon, PIT revenue growth is expected to return to an average of 4.9 per cent, in line with projected nominal GDP growth. 

Corporate income tax (CIT) revenues are projected to decrease by $10.9 billion, or 21.8 per cent, to $39.2 billion in 2020-21. Lower corporate profitability and general economic weakness due to the COVID-19 primarily explain this decline. In 2021-22, CIT is expected to rebound to $44.3 billion, or up 13.2 per cent. Over the remainder of the forecast horizon, CIT is forecast to grow at an average annual rate of 8.2 per cent reflecting improved economic conditions and stronger corporate profitability. It will, however, take several years for corporate tax revenues to return to pre-pandemic levels.

Non-resident income tax revenues are income taxes paid by non-residents on Canadian-sourced income, notably dividends and interest payments. These revenues are projected to increase to $9.9 billion in 2020-21, or 4.5 per cent, as non-resident taxpayers are expected to repatriate previously earned income to their home jurisdictions during the crisis.

GST revenues are forecast to fall to $29.4 billion in 2020-21, or 21.5 per cent, reflecting the temporary shutdown of large portions of the retail sector and the introduction of the one-time enhanced GST credit payment, before increasing to $38.9 billion in 2021-22, or 32.6 per cent. Over the remainder of the projection period, GST revenues are forecast to grow by 6.3 per cent per year, on average, reflecting the outlook for taxable consumption.

Customs import duties are projected to fall from $4.9 billion in 2019-20 to $3.7 billion in 2020-21, or 24.0 per cent, due to lower imports and a waiver of customs duties on medical goods for combatting the spread of COVID-19, before rebounding to $4.4 billion in 2021-22, or 18.3 per cent. Over the remainder of the horizon, customs import duties are projected to grow at an average annual rate of 6.3 per cent due to expected growth in imports.

Other excise taxes and duties (OETD) are projected to decline to $10.8 billion in 2020-21, or 7.4 per cent, reflecting decreased demand since the onset of the pandemic. OETD revenues are expected to increase to $11.9 billion in 2021-22, or 10.3 per cent, as demand recovers, and over the remainder of the projection period, are expected to grow at an average annual rate of 1.2 per cent, reflecting expected underlying consumption growth.

In 2020-21, EI premium revenues are projected to decrease by 3.4 per cent to $21.5 billion, due to a premium rate decrease from $1.62 per $100 of insurable earnings in 2019 to $1.58 in 2020. Over the remainder of the horizon, premium revenues are anticipated to grow at an average annual rate of 7 per cent due to anticipated increases in employment income and the improving labour market.

Other revenues consist of three broad components: net income from enterprise Crown corporations; other program revenues from returns on investments, proceeds from the sales of goods and services, and other miscellaneous revenues; and revenues in the Exchange Fund Account.

Enterprise Crown corporation revenues are projected to decrease by $25.3 billion in 2020-21 and increase by $25.6 billion in 2021-22, before growing thereafter at an average annual rate of 18.4 per cent starting 2022-23, reflecting outlooks presented in corporate plans of respective enterprise Crown corporations. In particular, the decrease in projected revenues in 2020-21 reflects the expensing of premiums paid on Bank of Canada purchases of Government of Canada securities on the secondary market to support liquidity in financial markets, as well as the provisioning for loan losses stemming from COVID-19 relief measures.

Other program revenues are affected by consolidated Crown corporation revenues, interest rates, inflation and exchange rate movements (which affect the Canadian-dollar value of foreign-denominated assets). These revenues are projected to decline by 34.6 per cent or $7.2 billion in 2020-21, primarily due to a decline in interest and penalty revenue of $4.0 billion and return on investments of $1 billion as a result of lower interest rates and  interest and penalty waivers provided as part of the government’s COVID-19 response, along with a $1.3 billion projected decline in revenue from sales of goods and services. Over the remainder of the forecast horizon, these revenues are projected to grow at an average annual rate of 11.4 per cent as a result of growth in revenue from sales of goods and services and interest and penalty revenue.

Net foreign exchange revenues, which consist mainly of returns on investments held in the Exchange Fund Account, are volatile and sensitive to fluctuations in foreign exchange rates and foreign interest rates. These revenues are projected to decrease in 2020-21 due mainly to lower projected interest rates.

Outlook for Program Expenses

Table A1.7
The Expense Outlook
billions of dollars
    Projection
  2019–
2020  
2020–
2021  
2021–
2022  
2022–
2023  
2023–
2024  
2024–
2025  
2025–
2026  
Major transfers to persons              
Elderly benefits
56.2 59.5 62.4 65.8 69.4 73.3 77.4
Employment Insurance benefits1
21.8 67.2 32.5 24.7 23.4 23.9 24.4
Canada Emergency Response Benefit and Canada Recovery Benefits
4.7 54.8 10.3 0.0 0.0 0.0 0.0
Canada Child Benefit2
24.3 27.9 27.4 26.0 26.5 27.0 27.5
Total
107.1 209.3 132.6 116.4 119.4 124.2 129.3
Major transfers to other levels of government              
Canada Health Transfer
40.9 41.9 43.1 44.4 46.9 49.1 51.1
Canada Social Transfer
14.6 15.0 15.5 15.9 16.4 16.9 17.4
Equalization
19.8 20.6 20.9 21.4 22.6 23.6 24.6
Territorial Formula Financing
3.9 4.2 4.4 4.6 4.8 4.9 5.0
Gas Tax Fund
2.2 2.2 2.3 2.3 2.4 2.4 2.5
Home care and mental health
1.1 1.3 1.5 1.2 1.2 1.2 1.2
Other fiscal arrangements3,4
-3.3 14.6 -5.6 -5.9 -6.2 -6.6 -6.9
Total
79.2 99.7 82.1 83.9 88.0 91.5 94.9
Direct program expenses               
Proceeds from the pollution pricing framework returned5
2.6 5.2 6.8 7.6 7.6 7.6 7.6
Canada Emergency Wage Subsidy
0.0 83.5 14.1 0.0 0.0 0.0 0.0
Other transfer payments4
54.4 110.0 75.5 59.1 60.7 61.2 62.3
Operating expenses6
95.2 113.7 110.1 106.9 108.7 108.4 109.9
Total
152.2 312.5 206.5 173.6 177.0 177.2 179.8
Total program expenses, excluding net actuarial losses 338.5 621.4 421.2 373.9 384.4 392.9 404.0
Net actuarial losses7
10.6 15.4 15.6 12.1 10.5 6.0 3.9
Per cent of GDP              
Major transfers to persons
4.6 9.6 5.7 4.7 4.7 4.6 4.7
Major transfers to other levels of government
3.4 4.6 3.5 3.4 3.4 3.4 3.4
Direct program expenses
6.6 14.3 8.8 7.1 6.9 6.6 6.5
Total program expenses 14.6 28.5 18.1 15.2 15.0 14.7 14.5
Note: Totals may not add due to rounding.
1 EI benefits include regular EI benefits, sickness, maternity, parental, compassionate care, fishing and work-sharing benefits, and employment benefits and support measures. The remaining EI costs relate mainly to administration and are part of operating expenses. For the first time, this includes the portion of payments for the Canada Emergency Response Benefit charged to the EI Operating Account, totalling $1.8 billion in 2019-20, and an estimated $35.0 billion in 2020-21.
2 Includes the Children’s disability benefits and residual payments for the Universal Child Care Benefit (UCCB), now replaced by the Canada Child Benefit.
3 Other fiscal arrangements includes the Quebec Abatement (Youth Allowances Recovery and Alternative Payments for Standing Programs); payments under the 2005 Offshore Arrangements; and established terms for repayable floor loans.
4Transfer payments to provinces and territories for cleaning up former oil and gas wells, support for essential workers, and the Safe Restart Agreement, as included in the EFS 2020, have been reclassified from Direct program expenses – Other transfer payments, to Major transfers to other levels of government – Other fiscal arrangements with no impact on total program expenses.
5 This includes the return of charges applied through the federal backstop, excluding those through the Output Based Pricing System, which are returned to their province/territory of origin through Climate Action Incentive payments and other climate supports.
6 This includes capital amortization expenses.
7 Actuarial gains and losses were previously reported as “Losses (gains) from employee future benefit plans” and as a part of Direct program expenses, but are now presented in a new line item titled Net actuarial losses.

Table A1.7 provides an overview of the projection for program expenses by major component. Program expenses consist of three main categories: major transfers to persons, major transfers to other levels of government, and direct program expenses.

Major transfers to persons—which consist of elderly, EI and children’s benefits, as well as the Canada Emergency Response Benefit and Recovery Benefits—are projected to increase to $209.3 billion in 2020-21.

Elderly benefits are projected to reach $59.5 billion in 2020-21, up 5.7 per cent, due to an increase in the population of seniors. Over the remainder of the horizon, elderly benefits are forecast to grow 5.4 per cent per year, on average. The expected increase in elderly benefits is due to a projected increase in the population of seniors and projected consumer price inflation, to which the benefits are fully indexed.

EI benefits are projected to increase to $67.2 billion in 2020-21, largely reflecting the cost of Economic Response Benefits ($37.9 billion) and higher unemployment resulting from the crisis. EI benefits are expected to fall to $23.4 billion by 2023-24 as a result of the projected improvement in the labour market. In the outer years of the projection period, EI benefits are forecast to grow at an average of 2.0 per cent annually, as the unemployment rate is projected to stabilize at around 6.0 per cent after 2023.

The Canada Emergency Response Benefit (CERB) was introduced as part of Canada’s COVID-19 Economic Response Plan to provide immediate assistance to Canadians not eligible for EI benefits. As the economy reopens, the government is committed to continuing to support all Canadians and has introduced the Canada Recovery Benefit (CRB), which provides $1,000 per two-week period to eligible individuals not entitled to regular EI Benefits, for up to 26 weeks. In addition, the Canada Recovery Sickness Benefit (CRSB) and the Canada Recovery Caregiving Benefit (CRCB) are available to eligible individuals, providing $500 per week of eligibility. The CERB and the Canada Recovery Benefits (CRB, CRSB and CRCB) are forecasted to cost $54.8 billion in 2020-21, decreasing to $10.3 billion in 2021-22 as the economy recovers and temporary programs end.

Canada Child Benefit (CCB) payments are projected to increase 14.4 per cent to $27.9 billion in 2020-21, largely reflecting the one-time top up provided in May 2020. These benefits will stay close to this level for 2021-22, largely due to the temporary support for families with young children proposed in this Statement. In the outer years of the horizon, CCB payments are forecast to grow at an average annual rate of 1.9 per cent, reflecting forecasted consumer price inflation, to which the benefits are indexed.

Major transfers to other levels of government – which include the Canada Health Transfer (CHT), the Canada Social Transfer (CST), Equalization, Territorial Formula Financing and the Gas Tax Fund, among others – are expected to increase by 25.9 per cent to $99.7 billion in 2020-21. The increase in 2020-21 is driven by previously announced COVID-19 response measures, including $12.9 billion for the Safe Restart Agreement, $2.0 billion for the Safe Return to Class Fund, and $3.0 billion to support essential workers through a wage top-up.

The CHT is projected to grow from $41.9 billion in 2020-21 to $51.1 billion in 2025-26. The CHT grows in line with a three-year moving average of nominal GDP growth, with funding guaranteed to increase by at least 3.0 per cent per year. The CST is legislated to grow at 3.0 per cent per year. Gas Tax Fund payments are indexed at 2.0 per cent per year, with increases applied in $100 million increments. Home care and mental health transfers are projected to be $1.3 billion in 2020–21, stabilizing at $1.2 billion starting in 2022-23.

Direct program expenses – which include proceeds from the pollution pricing framework returned, the Canada Emergency Wage Subsidy, other transfer payments administered by departments, and operating expenses – are expected to increase 105.3 per cent to $312.5 billion in 2020-21. The projected increase in direct program expenses is largely driven by COVID-19 response measures, including the wage subsidy, with an estimated cost of $83.5 billion in 2020-21, and $7.5 billion in support of medical research and vaccine development in 2020-21.

Other transfer payments administered by departments are projected to increase to $110.0 billion in 2020-21, reflecting investments made to help Canadian families and businesses through the crisis. This includes the cost of the loan repayment incentive for the Canada Emergency Business Account, and $3.0 billion for the Canada Emergency Student Benefit. Also contributing to the increased costs are supports for seniors through a one-time payment ($2.5 billion), and to small businesses through the Canada Emergency Commercial Rent Assistance ($1.7 billion), and through the Canada Emergency Rent Subsidy ($4.4 billion). Over the remainder of the forecast horizon, other transfer payments are projected to decrease to $59.1 billion by 2022-23, as the economy recovers and support measures are lifted, after which they are projected to rise by 1.8 per cent per year on average.

Operating expenses reflect the cost of doing business, including current pension service costs, for more than 100 government departments, agencies and Crown corporations. Operating expenses are projected to increase to $113.7 billion in 2020-21. This includes measures to protect the health and safety of Canadians, including $7.9 billion to procure medical and personal protective equipment in response to the crisis. Operating expenses are projected to decrease to $106.9 billion by 2022-23, after which they are projected to grow at an average of 0.9 per cent, annually.

Net actuarial losses – which represent changes in the measurement of the government’s obligations for pensions and other employee future benefits accrued in previous fiscal years – are expected to increase to $15.4 billion in 2020-21. The increased loss is largely attributable to lower long-term interest rates, which are used to value the obligations, as well as increased costs associated with the utilization of disability and other future benefits provided to veterans.

Financial Source/Requirement

The budgetary balance is presented on a full accrual basis of accounting, recording government revenues and expenses when they are earned or incurred, regardless of when the cash is received or paid.

In contrast, the financial/source requirement measures the difference between cash coming in to the government and cash going out. This measure is affected not only by the budgetary balance, but also by the government’s non-budgetary transactions. These include changes in federal employee pension liabilities; changes in non-financial assets; investing activities through loans, investments and advances; and changes in other financial assets and liabilities, including foreign exchange activities.

Table A1.8
The Budgetary Balance, Non-Budgetary Transactions and Financial Source/Requirement
billions of dollars
    Projection
  2019–
2020  
2020–
2021  
2021–
2022  
2022–
2023  
2023–
2024  
2024–
2025  
2025–
2026  
Budgetary balance -39.4 -381.6 -121.2 -50.7 -43.3 -30.9 -24.9
Non-budgetary transactions              
  Pensions and other accounts 10.3 15.8 14.9 12.5 10.9 6.2 3.7
Non-financial assets
-4.9 -5.4 -5.2 -4.6 -3.7 -2.9 -2.5
Loans, investments and advances
             
Enterprise Crown corporations
-13.5 -38.7 1.2 2.6 0.2 0.7 4.0
Other
-1.7 -40.7 -0.8 22.7 -0.9 -1.4 -4.1
Total
-15.1 -79.4 0.4 25.3 -0.7 -0.7 -0.0
Other transactions
             
Accounts payable, receivable, accruals and allowances
7.1 -1.1 -3.7 -4.0 -3.5 -3.9 -4.1
Foreign exchange activities
-5.2 3.7 -3.5 -4.2 -4.3 -4.3 -3.3
Total
1.8 2.6 -7.3 -8.3 -7.9 -8.3 -7.4
Total -7.8 -66.5 2.9 24.9 -1.5 -5.6 -6.2
Financial source/requirement -47.2 -448.1 -118.3 -25.8 -44.8 -36.5 -31.1

As shown in Table A1.8, a financial requirement is projected in each year over the forecast horizon, largely reflecting financial requirements associated with the projected budgetary balance. The projected financial requirement in 2020-21 reflects in large part financing of the budgetary balance as well as increases in the government’s loans, investments and advances. This latter category includes funding to enterprise Crown corporations to support financing programs for businesses – including to the Business Development Bank of Canada and Export Development Canada under the government’s Business Credit Availability Program, Farm Credit Canada and the Canada Development Investment Corporation. Other financing arrangements include loans issued by the government under the Canada Emergency Business Account.

Policy Actions Taken since the 2020 Economic and Fiscal Snapshot

Since 2016, the government has provided a transparent overview of all off-cycle spending. The investments (Table A1.9) ensure that Canadians are continually well served by the programs they rely on and that government operations carry on as usual.

Table A1.9
Policy Actions since the 2020 Economic and Fiscal Snapshot
millions of dollars
  2020–
2021  
2021–
2022  
2022–
2023  
2023–
2024  
2024–
2025
2025–
2026
Government Operations, Fairness and Openness 67 103 51 49 49 50
Supporting Service Delivery On Reserve 8 16 3 0 0 0
Funding provided to Indigenous Services Canada to support service delivery on reserve.
Government of Canada IT Infrastructure 28 0 0 0 0 0
Funding for Shared Services Canada to ensure that Canadians can continue to rely on Government of Canada toll-free voice services and contact centres when accessing important programs and services during the pandemic. Funding will also ensure that federal public servants can continue to work productively in a remote environment.
Supporting the Construction of the New Library and Archives/Ottawa Public Library Joint Facility Project 0 0 0 0 0 1
Funding to Library and Archives Canada to address updated construction cost estimates and to support sustainability enhancements for a net-zero carbon facility.
Consumer Privacy Protection Act 0 9 16 19 18 18
Funding to support the implementation and enforcement of private sector privacy legislation.
Supporting Statistics Canada Operations and Census 2021 19 26 3 1 0 0
Less: Funds Previously Provisioned in the Fiscal Framework
-2 -14 -1 0 0 0
Less: Year-Over-Year Reallocation of Funding
-16 17 0 0 0 0
Funding for Statistics Canada to address operational pressures related to COVID-19, including cost increases to conduct Census 2021.
COVID-19 Central Advertising Fund Top-up 0 20 0 0 0 0
Funding to increase the Government of Canada’s Central Advertising Fund, in order to continue to inform Canadians and raise awareness on public health measures and actions Canadians can take to protect themselves and others.
Office of the Auditor General 31 29 30 30 31 31
Funding for the Office of the Auditor General to ensure that the Office is adequately resourced to deliver its mandate and to continue supporting elected officials in their role of overseeing and approving government spending. The funding will allow the Office to undertake essential modernization of audit tools and practices, ensure that IT systems are safeguarded, and hire additional auditors and support staff.
Growth, Innovation, Infrastructure and the Environment 75 118 35 35 35 35
Montreal Biosphere 0 3 3 3 3 3
Less: Funds Previously Provisioned in the Fiscal Framework
0 -3 0 0 0 0
Less: Funds Sourced From Existing Departmental Resources
0 0 -2 -2 -2 -2
Funding for Environment and Climate Change Canada to support the transfer of operational responsibility for the Montreal Biosphere Museum to the City of Montreal as part of tripartite agreement with the City and the Government of Quebec.
Specifying Climate Action Incentive Payment Amounts for 2021 27 74 27 27 27 27
The net fiscal impact above reflects adjustments to Climate Action Incentive payment amounts for Ontario, Manitoba, Saskatchewan and Alberta.  2021 payment amounts (to be claimed on 2020 tax returns in early 2021) will be announced shortly.

In terms of overall fiscal impact, these accounting costs are largely offset by adjustments to projections of fuel charge proceeds, which are included in proceeds from the pollution pricing framework in Table A1.6.

As previously announced in the 2018 Fall Economic Statement, the accounting treatment of Climate Action Incentive payments requires some of the costs to be borne in the fiscal year prior to the fuel charge being collected, because they are delivered through the personal income tax system through returns for the previous tax year. In practice, however, the Government of Canada is simply taking the direct proceeds from the fuel charge and returning all the proceeds to the province of origin.
Big Bar Rockslide 48 44 7 7 7 7
Funding to Fisheries and Oceans Canada to design and construct a permanent fishway to support the natural passage of wild Pacific salmon through the obstruction caused by the Big Bar rockslide, to support temporary measures that provide for salmon passage while the fishway is under construction, and emergency conservation measures.
Labour Markets, Health, Safety and Economic Prosperity of Canadians 4 3 3 2 1 1
Modernizing the National Arts Centre's Digital Infrastructure 0 0 1 1 1 1
The National Arts Centre's back office systems – including its financial, ticketing, and phone systems – have become severely outdated. This measure will support the updating of these systems and position the NAC to continue delivering world-class artistic performances and customer service to Canadians once the pandemic has concluded.
Alternative Format Materials 4 3 2 1 0 0
Funding for the Centre for Equitable Library Access and the National Network for Equitable Library Service to support the transition towards industry-based production and distribution of accessible reading materials to Canadians with print disabilities.
Trade, International Relations and Security 129 170 -85 -543 -1,354 -1,282
Interim Financial Support for the Canadian Commercial Corporation 9 0 0 0 0 0
The government is continuing to support Canadian exporters and facilitating exporters’ connections to key international markets during this fluctuating global economic period. To ensure the Canadian Commercial Corporation (CCC) can continue to support Canadian exporters through challenging economic conditions, the Fall Economic Statement proposes to provide the CCC with up to $8.5 million in 2020-21.
Updating Funding for the Defence Investment Plan 3,290 3,545 3,711 3,896 3,880 4,129
Less: Funds Previously Provisioned in the Fiscal Framework
0 0 0 0 0 0
Less: Funds Sourced From Existing Departmental Resources
-3,170 -3,375 -3,796 -4,439 -5,234 -5,411
$13.3 billion for the Department of National Defence, including $4.4 billion to continue to implement the Defence Investment Plan approved under Canada's defence policy, Strong, Secure, Engaged, and $8.9 billion for anticipated future requirements. This measure also updates the profile of previously approved funding (on an accrual basis) to reflect the status of project implementation and accounting adjustments.
Tax and Financial Sector Policy 3 11 11 11 11 10
Supporting Canada’s Agricultural Cooperatives 3 11 11 11 11 10
Due to a number of factors, agricultural cooperatives may have difficulties raising capital. The temporary tax deferral for patronage dividends paid in shares is intended to help them raise the capital needed to grow. The extension of the deferral for another 5 years will support a sector that is currently also facing labour availability challenges, international market volatility as well as increased weather volatility.
Registered Disability Savings Plans 0 0 0 0 0 0
Maintain the implementation timeline announced in Budget 2019 for changes to Registered Disability Savings Plans (RDSPs) for beneficiaries who cease to be eligible for the Disability Tax Credit, with a small modification to the proposed reduction in the holdback of grant and bond amounts, to improve consistency in the treatment of all beneficiaries. As key aspects of the measure are intended to come into force on January 1, 2021, any excess repayments of grant and bond that occur in 2020 but before the measure can be enacted would be returned to a beneficiary’s RDSP following enactment.
(Net) Fiscal Impact of Non-Announced Measures 2,336 5,401 754 927 941 632
The net fiscal impact of measures that are not announced is presented at the aggregate level, and would include provisions for anticipated Cabinet decisions not yet made and funding decisions related to national security, commercial sensitivity, contract negotiations and litigation issues.
Net Fiscal Impact – Total Policy Actions Taken since 2020 Economic and Fiscal Snapshot 2,614 5,806 768 482 -317 -533
Note: Totals may not add due to rounding.
Table A1.10
Financial Sector Legislative Measures
Strengthening Canada’s Anti-Money Laundering and Anti-Terrorist Financing (AML/ATF) Regime
The government proposes to amend the Proceeds of Crime (Money Laundering) and Terrorist Financing Act to enable the Financial Transactions and Reports Analysis Centre of Canada to recover its compliance costs, clarify its ability to obtain additional information from reporting entities and expand the information it can disclose; strengthen criminal penalties and the registration framework for money services businesses; regulate armoured car services for AML/ATF purposes; clarify certain definitions and disclosure recipients; and make other technical amendments to the Act.

The government also proposes to amend the Justice for Victims of Corrupt Foreign Officials Act (Sergei Magnitsky Law) to reduce administrative burden for financial institutions filing reports under this Act.
Financial Consumer Protection
The government proposes to make technical amendments to the Financial Consumer Protection Framework in the Bank Act to clarify that the statutory right of cancellation provision does not extend to contracts between banks and large business clients. 
Financial Stability Measures
The government proposes to introduce amendments to the Canada Deposit Insurance Corporation Act to:
  • clarify the scope of, and support, the cross-border enforceability of the stay provisions applicable to eligible financial contracts; and
  • clarify how investors, creditors and other participants may be compensated as a result of actions taken by financial sector authorities to sell, wind-down or restore to viability a failing bank.
The government also proposes to introduce amendments to the Payment Clearing and Settlement Act to clarify how investors, creditors and other participants may be compensated as a result of actions taken by financial sector authorities to sell, wind-down or restore to viability a failing financial market infrastructure.
Modernizing the Federal Unclaimed Assets Regime
Modernizing the federal unclaimed assets regime by implementing amendments aimed at improving the current framework managed by the Bank of Canada and expanding its scope to include unclaimed balances from terminated federally regulated pension plans and foreign denominated bank accounts.
Payment Clearing and Settlement Act
Clarify the Bank of Canada’s authority to oversee payment exchanges as clearing and settlement systems in the Payment Clearing and Settlement Act.
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