The Yukon government is forecasting a $31.6-million deficit in 2020-21, according to an interim report released Thursday.

This is due, in part, to a $95.9-million increase in operations and maintenance spending, which includes public health spending and financial aid packages.

“Most of this is COVID-related,” Premier Sandy Silver told media Thursday afternoon. It was the first afternoon MLAs had convened in the legislature since last March.

The fiscal update shows $88.7 million of that projected increase is due to financial aid and health care spending related to COVID-19.

The premier said he is still optimistic about the territory’s financial health.

“The interim fiscal and economic update shows the Yukon as one of only two other Canadian jurisdictions expecting to see real GDP growth in 2020,” Silver said.

The Yukon’s budget saw the third-lowest impact of any province or territory in 2020-21, according to the report.

Canada’s smaller economies were less affected due to the large percentage of public sector employees. The Yukon’s mining sector has also gone relatively uninterrupted during the pandemic.

“That’s not to say that we don’t have a lot of businesses right now that are in serious triage … we need to keep our vigilance up for the business community,” Silver said.

The government is expecting $52.9 million in federal support to off-set the COVID-19 costs.

The premier conceded that the operational spending deficit could become chronic over the next few years.

“I don’t think there’s a government in Canada or internationally that’s not very, very concerned,” Silver said.

“It’s very concerning to Yukoners and it’s very concerning to us as a government that we can have the ability to not pass on debt to future generations.”

Total government revenue in 2020-21 is forecast to be $1.3 billion, which is a $10-million decrease from earlier estimates.

The stunted revenue is because personal incomes have not risen as expected due to COVID-19, according to the report. There have also been reductions in camping and hunting revenues, as well as the waiving of fees to the mining and aviation industries.

The Dempster Fibre Project has been deferred to 2021-22 due to permitting delays.

This deferral has resulted in a reduction in forecast capital spending, the report says.

Gross capital expenditures are projected to decrease by $3.7 million from the main estimates.

The report estimates that the Yukon’s economy will see gradual improvement, assuming a wave of infection doesn’t force another aggressive lockdown.

“Community spread of COVID-19 in Yukon is the biggest downside risk to the forecast, especially if mining work sites are affected,” the report says.

The report also notes that the pandemic may change consumer behaviour long-term, meaning tourism activities may not bounce back.

Interventions by banks have also helped avoid a financial crisis, but this system is vulnerable due to growing consumer debt and public spending.

The unstable economy may benefit the mining sector, the report suggests.

The prices of copper and silver have increased during the pandemic.

“As investors look for safe investments during a time of economic and market upheaval, metal prices have seen notable appreciation in recent months,” the report says.

“If metal prices hold their value after the crisis dissipates, it could lead to renewed interest in the territory’s metal resources.”

The report also notes that economic forecasting is extremely difficult, because the future of the pandemic is unknown.

“Even if a vaccine were to become widely available late this year or in 2021, the virus is likely to drag on economic performance over the medium term,” the report says.

When the budget was originally tabled on March 5, there were only 105,000 confirmed COVID-19 cases worldwide. Two weeks later, case numbers tripled and the financial markets collapsed.

“While conditions seem to have stabilized, the experience over the last several months shows how quickly risks can materialize,” the report says.

The Yukon lost 4,000 jobs between March and June this year. Most of these job losses were in the service industries. Food and accommodation employment was cut in half and accounts for one-third of overall job losses.

The unemployment rate in August was eight per cent – the highest it’s been since June 2015.

When the number of unemployed individuals who were not looking for work during the pandemic are accounted for, the unemployment rate balloons to 12.5 per cent.

Almost 9,000 Yukoners applied for the Canada Emergency Response Benefit (CERB) and received an estimated $72 million.

About 4,000 Yukoners saw their wages subsidized due to the Canada Emergency Wage Subsidy (CEWS).

The housing, mining and construction industries are staying afloat in the Yukon despite the pandemic, the report notes.

“Even with the gradual reopening of the economy underway, 2020 will be a challenging year for Yukon’s economy,” the report says.

“Fallout from the virus is expected to extend into next year and possibly beyond, with potential ramifications affecting both Yukon’s economic and fiscal outlooks.”