Factors impacting Canada’s economy
The article reveals some salient facts regarding the following aspects:
- fiscal deficit that Canada have confronted with by this year amounting $ 13.5 billion
- Incident similar to this is going to impact the economic condition of the country significantly (Binette & Tchebotarev, 2019)
- From a macroeconomic perspective, the article reflects the fact that $ 1 billion sales and income tax earning is able to reduce the fiscal deficit to $ 13.5 billion
- In this process it have invigorated various economic challenges in terms of rise in debt burden (Edwards, 2018)
- Efficient fiscal management is essential to help the economic scenario to cope up with the prevailing situation
Every economy runs on the basis of the national income that it earns and reinvest within the country for its inclusive growth and ensuring the take off stage of development. In the case of Canada, the national income of the economy depends upon the sum of consumption, investment, government spending as well as the difference between the exports and the imports. The macroeconomic balance is kept when there is the possibility of the fact that the fiscal deficit can be compensated by the public financing and there is rise in the gross domestic product (Binette & Tchebotarev, 2019). Thus the parametric factor that is responsible for impacting in the economy are:
- Deficit financing and the balance of it with public expenditure
- Public financing will increase infrastructural development, creating hospitals, educational hubs and many more.
- Rise in the per capita income will take place followed by generating employment
- Monitoring the inflation rate so that it do not get very high
- Inflation rate will automatically get balanced if employment rises as both of unemployment and inflation are inversely proportional
The analysis of the article is segment in three segments in order to provide a better understanding regarding the discussion under consideration which can be represented as follows:
The article reflects the fact that the generation of higher revenue earnings is the evidence that incorporates the fact that the plan is working as the government anticipated. The financial report of the third quarter of 2018-19 revealed the fact that the accountable deficit amount in his fiscal year is lower by $ 2.5 billion as compared to previous year performance. However, projection incorporates that the country may face a rise in the fiscal deficit at the end of the year by $ 12.3 billion as it is in an endeavor to compete with the global economic headwinds.
The situation is taking place due to the reason that the crippling debt payments is the latent factor that may instigate in challenges regarding interest burdens of the rising debt as well as the financial risks associated with it. As per the quarterly reports the amount of interest that will be paid for the debt is about $ 12.5 billion (Ontario’s deficit $13.5B this fiscal year, economic challenges ahead, minister says | CBC News, 2019).
The situation may give rise to economic instability in near future. Along with that, political challenges comes from the aspect when the opposition questioned about the fact that there is a substantial cut in the facilitation of public programs and services which the government will justify with the fact that it has been confronted with debt burden. Hence, raising the debt payment is a planned strategy taken by the government as per the opposition. The government official on this regard should focus on eliminating the deficits within the mandate of 4 years and thus economic balance will be prevailed based on responsible fiscal management.
Challenges associated with rising debt payments
In order to overcome the challenges that the economy may face due to probabilistically higher risk burden related to the interest payments upon debt, the anticipated measures that will bring the economy under balance by eliminating the fiscal deficit is considered to be controlling the discretionary spending.
Notably, discretionary spending relates to the aspect of government expenditure that are being done upon the transportation sector, education and hospitality sector, infrastructural development, foreign aid as well as national defense, etc. The government have incorporated the fact that it is not possible to restrict the daily needs of the country people as this will create riots and unnecessary instability within the economy. However, after the citizens pays their personal necessities like rent, cost of consumption, mortgages, utilities and taxes what remains is the unnecessary expenditures or luxury expenses as well as frivolous purchases like daily cost of coffee, travelling cost, etc. (Lerner & Stern, 2019). which the government focused on reducing. This will bring the debt burden down and keep the balance between the revenue generation and the debt pressure.
The article incorporate the importance of financial stability and economic balance as well as maintenance of a significant budget. The budgetary resolutions includes deficit projections, spending the government funds in the entitlement programs, tax policies while not spending in the activities that raises unnecessary expenses without fulfilling the common needs of the citizens of the country.
The projected change is being reflected in the aforementioned picture that may bring the debts down if the spending is done upon the necessities of the citizens and the frivolous spending are being reduced (Sims, 2016). The rapid growth in the entitlement spending which is known as the mandatory spending is important as the trend will move towards balancing the economy and boosting it towards a state of financial stability and economic development brining qualitative changes in the economy and not only quantitative changes like growth.
Conclusion
Based on the analysis it is been seen that there is importance of incorporating effective measures in the economy that will mitigate the risks associated with the debts as well as the interest burden associated with the debts. It is important on this regard to ensure spending in the mandatory expenditure only but not on the frivolous purchases. It will render a substantial impact on the economic outcomes of the country and stabilize its temporary locations and uncertainties within the economy as a whole. The macro economic factors like inflation, unemployment will reduce as well as economic stability will sustain in the long run. After the country becomes stable it will be possible for the country in increase spending in the luxury goods as well as attack foreign investment but before the financial stability of the country this step high risk to bring economic disturbance.
References
Binette, A., & Tchebotarev, D. (2019). Canada’s Monetary Policy Report: If Text Could Speak, What Would It Say? (No. 2019-5). Bank of Canada. https://www.bankofcanada.ca/wp-content/uploads/2019/02/san2019-5.pdf
Edwards, C. (2018). Government Spending and the Deficit Must Be Decreased. The Federal Budget and Government Spending, 53. https://books.google.com/books?hl=en&lr=&id=69VoDwAAQBAJ&oi=fnd&pg=PA53&dq=discretionary+spending+of+Canada&ots=WC5l9tYhPT&sig=E4liKDAs5sj5tNHgjl-thNfGzI4
Lerner, J., & Stern, S. (Eds.). (2019). Innovation Policy and the Economy, 2018 (Vol. 19). University of Chicago Press. https://books.google.co.in/books?hl=en&lr=&id=AdN5DwAAQBAJ&oi=fnd&pg=PT11&dq=Canadian+Economy+Policy&ots=wIrL-Twk6B&sig=5liBoveUZgdEZjHA8hDUse_lrgQ
Ontario’s deficit $13.5B this fiscal year, economic challenges ahead, minister says | CBC News. (2019). Retrieved from https://www.cbc.ca/news/canada/toronto/ontario-finance-minister-vic-fedeli-provincial-government-deficit-1.5017415
Sims, C. A. (2016, August). Fiscal policy, monetary policy and central bank independence. In Kansas Citi Fed Jackson Hole Conference.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
