Canada Elections: Back To Square One

Benjamin Disraeli, the former Prime Minister of the U.K., once said, “there is no gambling like politics.” Canadian Prime Minister Justin Trudeau made a wager last month, when he called for an early election. He had hoped that an outright majority in the Canadian parliament would allow passage of additional government spending, partly financed by higher taxes.

Trudeau’s bet broke even, yielding substantially the same minority government as before the election. The outcome will not be costly either for him or for the Canadian economy. The outlook remains bright, but some issues will require careful handling.

After a faltering start, the Trudeau government managed to turn a corner in the fight against COVID-19. The country is now among the most fully vaccinated populations, which has enabled economic reopening. The government’s substantial financial support to households and businesses, amounting to about 20% of GDP, helped alleviate economic pain and set the stage for recovery. According to International Monetary Fund forecasts, Canada’s economy is likely to grow by 6.3% this year after adjusting for inflation, above advanced economies’ average of 5.6%.