Canada Unveils Stimlus Package Worth 3% Of GDP

When discussing the most important hypothetical question facing traders today, namely what size of fiscal stimulus would be sufficient to put a floor in the market, yesterday we showed charts from JPMorgan economists estimating the amount of fiscal thrust in crises over the past 20 years expressed as a percentage point of real GDP growth. The data highlighted the following principle: Fiscal thrust in the DM economies has tended to aim for 1% to 2% of GDP during recessions, and so far the closest to hit that number are the UK and Australia.

And as we wait to see what the final terms of what the fluid US fiscal stimulus will be, which at last count was said to approach an impressive $1.3 trillion, moments ago Canada’s Prime Minister Trudeau surprised – hopefully to the upside – when he announced a C$82BN stimulus package as part of the government’s fiscal measures to deal with coronavirus impacts on the Canadian economy, one which amounts to roughly 3% of GDP.

As part of the stimulus, the government will “provide up to $27 billion in direct support to Canadian workers and businesses, plus $55 billion to meet liquidity needs of Canadian businesses and households through tax deferrals to help stabilize the economy.”

Additionally, Canadian will have until August 2020 to pay taxes.

Alas, the kneejerk response to the stimulus appears underwhelming, as the loonie, already plunging ahead of the announcement, has accelerated its slide, tumbling to 1.4494 against the dollar, with the USDCAD rising to the highest level in 4 years.

Perhaps, taking a page out of Trump’s playbook, Trudeau can watch the market’s reaction, and announce additional C$10BN stimulus increments until the CAD finally stops plunging.