The Finance Minister released the figures Wednesday as part of an economic and fiscal "snapshot," which provides the first estimate of Ottawa's bottom line since a December report that came out before the pandemic.
He said he's planning for another update, or possibly a budget, in the fall.
After months of frequently announcing new programs to help workers and business owners manage through the crisis, the government says its attention is now turning to phasing out some of those emergency supports and focusing on economic recovery.
Ottawa signalled Wednesday that greater use of the federal wage-subsidy plan for employers will be a key part of that effort, although few details were offered.
Although Mr. Morneau told reporters that the government is planning for a "recovery phase," he declined to say how much extra funding will be required or who will receive that assistance.
The minister said the details will "be very dependent on our success in going through what we're going through right now."
The Finance Minister said that the unprecedented deficit this year was a necessary response to the pandemic, and Wednesday's report said failure to act would have added a further two points to the unemployment rate and led to a GDP decline of 10 per cent.
That one-year deficit figure is nearly the same size as total federal spending in a normal year.
The risk to any government that dramatically increases its debt load is that credit downgrades could lead to higher servicing costs.
While one rating agency - Fitch - downgraded Canada's triple-A credit rating to double-A-plus last month over deficit concerns, other major agencies did not immediately follow suit.
Part of the government's message Wednesday appears aimed at assuring rating agencies that Canada's debt management plan is sound.
While the snapshot did not announce any new programs, it did include a major increase in the projected cost of the Canada Emergency Wage Subsidy. In June, that program was estimated to cost $45-billion. The report says that estimate will increase to $82.3-billion and that this added cost is in anticipation of future announcements related to changes to that program.
One key message that the government aimed to get across in the 168-page document is a belief that the growing debt load is manageable in light of historically low interest rates. Ottawa intends to lock in these lower rates by increasing the percentage of debt that is issued through longer-term bonds. The government notes that the cost to service the federal debt will actually be slightly lower this year than the previous year.
"We're significantly increasing our longer-term debt to manage the situation at a time where the cost of debt is particularly low," Mr. Morneau told reporters Wednesday. "It's remarkable that we've issued this much debt, yet our actual debt charges this year are going to be $4-billion less than we even thought they were going to be a year ago.
"So the cost of that debt is manageable.
Now, we need to think about how we grow and create opportunities so that we can have long-term, sustainable management of this shock to our system."
Ahead of the pandemic, Mr. Morneau had projected a deficit of $28.1-billion in the fiscal year that started on April 1.
The much-larger deficit is primarily owing to a $71.1-billion decline in tax revenues, combined with $227.9-billion in direct spending and tax measures in response to COVID-19 and other adjustments to the fiscal forecast.
The update states the the drop in federal revenues is the steepest since the Great Depression and twice as large as the decline that occurred during the 2008-09 global financial crisis.
The $343.2-billion deficit figure represents 15.9 per cent of GDP and brings the federal debt-to-GDP ratio to 49.1 per cent.
For context, the federal debt-to-GDP ratio reached a peak of 66.8 per cent in the 1995-96 fiscal year, which prompted strong concern from global lenders and triggered an era of deep fiscal restraint to bring the federal deficits and debt back in line.
Another point of comparison is the size of this year's projected deficit to total government spending. The 2016-17 fiscal year was the first time in history that total government spending was higher than $300-billion.
In 2018-19, total federal spending was $346-billion.
The Conservative Party responded by pointing out that Mr. Morneau did not state, during his speech in the House, the exact size of the projected deficit or Canada's debt.
"This government has now smashed through the $1-trillion debt mark," Conservative MP and finance critic Pierre Poilievre said.
Mr. Poilievre said most of the government's emergency response spending this year was necessary, but added that the government now needs to unveil "a plan to bring our economy back to life." The Conservatives are calling on Ottawa to make further adjustments to the existing wage subsidy and rent-relief program to meet the needs of the private sector.
The NDP said the government has not done enough to respond to the needs of the poorest Canadians, including those who are disabled, while failing to force the private sector to pay its fair share of taxes.
"The poorest of the poor in this country have not received a single cent throughout this pandemic," NDP MP and finance critic Peter Julian said.
The government's projections are based on an average of private-sector forecasts.
Those average forecasts show that the Canadian economy will shrink by 6.8 per cent in 2020.
Ottawa said the Canadian economy bottomed out in April, adding that the "worst is behind us."
While there will be "large rebounds in real GDP growth" as sectors of the economy reopen, the snapshot predicts that "the pace of economic growth is likely to remain soft as some containment measures, such as travel restrictions, will remain for some time."
The service sector has been particularly hard hit by the pandemic, with women having faced "slightly larger reduction in hours worked and lost their jobs earlier than men."
The pandemic had a devastating impact on sectors such as accommodation and food services, culture and recreation, according to the report. Falling oil prices created an additional challenge in oil-producing regions.
The government is now predicting an "uneven and gradual recovery," the pace of which will be dictated in part by the state of the pandemic.
"Canadians may also choose to delay major purchases such as cars or houses until signs that hiring and the recovery is well under way," the report said.