Unprecedented government budget deficits remain essential to underpin the fragile economic recovery from the pandemic. However, now is the time – while financial conditions are favourable – for governments to design “growth-friendly” fiscal plans to reduce budget deficits after the pandemic and avoid excessive public debt growth.
In their October commentary, Todd Mattina, Mackenzie’s Chief Economist, and Economist Jules Boudreau, examine the impact that stimulus has had on propping up the economy and explore the risks associated with high government debt levels over the longer term.
Now is the time, they suggest, for governments to craft credible plans for “growth-friendly” post- pandemic fiscal policies to rebuild their fiscal buffers. Among their recommendations:
• Protecting infrastructure investments
• Cutting inefficient targeted subsidies
• Closing tax loopholes
For more timely insights from Todd and Jules, read their October commentary, “Fighting Debt with More Debt”.