Rising consumer prices, abnormally low interest rates… observers are increasingly worried that Canadians will be hit by inflation over time. For economist Germain Belzile, if the federal government continues to generate such large budget deficits, the maple country is not immune to a recession. Interview.
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Canada soon hit by inflation? This is one of the hypotheses in vogue since the Covid-19 pandemic pointed out. On April 21, Statistics Canada announced that the consumer price index was up 2.2% in March compared to the same month of the previous year. In recent days, economists have invited to be careful before concluding with the catastrophe, but Germain Belzile, contacted by Sputnik, wants to be less reassuring.
“Abnormally low” interest rates, a bad omen?
A well-known economist in Canada, he points out from the outset that several foods have already increased in grocery stores, a concrete sign of the economic impacts of containment. According to him, the maintenance of interest rates “abnormally weakBy the Bank of Canada could, among other factors, contribute to the deterioration of the health of the Canadian economy.
“An explosion in inflation is not an impossible scenario, the concerns are well founded. We should not be overly alarmist, but we must certainly remain vigilant. […] When demand is up and supply is falling, the rule is that the cost of living goes up. Currently, the strong increase in the prices of construction materials and wood illustrates this trend, ”he explains.
But what Germain Belzile fears most are the medium and long-term effects of the Liberal budget deficits, led by Federal Prime Minister Justin Trudeau. During the pandemic, they increased aid programs of all kinds and spending so, they explained, to stimulate the economy to offset the negative impacts of health measures.
The Deputy Prime Minister and Minister of Finance, Chrystia Freeland, justified herself on the occasion of the tabling of the last budget:
“In the current environment of low interest rates, not only can we afford these investments in the country’s future, it would be unwise of us not to make them. Our decision last year to help Canadians – at a high cost, of course – has already paid off. ”
This last budget includes a 100 billion stimulus plan Canadian dollars. According to projections, within five years, the Canadian federal debt could represent double what it totaled before the first wave of the virus and thus reach 1.411 billion dollars.
Budget deficits galore in Ottawa
A lecturer at the École des Hautes Etudes Commerciales de Montréal (HEC), Germain Belzile considers this budgetary policy inconsistent, which “pass the bill on to the next generations».
“There is a great recklessness on the part of the Trudeau Liberals in the management of public finances. […] Combined with the aging of the population and the increase in health costs, the accumulation of deficits could plunge us into a delicate situation. […] 8% of the taxes that go to the federal government are used only to pay the interest on the debt [… ]. People started to be afraid of buying Canadian debt bonds, ”observes the economist.
These last weeks, the staggering increase in the price of wood in Canada, which can go up to 300% depending on the type of gasoline, has been deplored in the media. As the construction market prepares to take off again, the shortage of basic materials could have serious consequences for the finances of Canadians.
Germain Belzile specifies, however, that in this regard, Canada is still suffering the repercussions of the global financial crisis of 2007-2008 today. In the United States, many factories processing lumber and other materials had to close their doors, reducing supply in the neighboring country.
On a note, the economist also invites not “never take for granted»The good health of the Canadian economy:
“No country is completely immune to high inflation and a currency printing epidemic. It’s always something that can happen again if you’re not careful, ”he insists.
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