OTTAWA, Canada: After Ottawa ended pandemic-era support last month and amid a slowing economy and high-interest rates, many Canadian small businesses could potentially go bankrupt this year.

Small firms that employ fewer than 100 people employ almost two-thirds of Canada’s 12 million private workers.

Lobby groups and economists have warned that a surge in bankruptcies, which rose 38 percent in the first 11 months of 2023, would stifle economic growth.

In January, small businesses faced a deadline to repay interest-free loans of C$60,000 ($44,676), offered during the COVID-19 pandemic.

On Monday, Finance Minister Chrystia Freeland said that of the 900,000 who had taken up the government loans, a fifth had not repaid them yet.

The Canadian Federation of Independent Businesses (CFIB), a small-business lobby group, estimates a quarter had missed the deadline.

“The Department of Finance is not expecting a negative impact on the economy on account of repayment of the loans given as support during the pandemic, and loan recipients have long had full information on timelines and have been able to plan accordingly,” said Katherine Cuplinskas, spokesperson for the finance minister.

The latest official data showed that in 2021, some 1.2 million small businesses with employees in Canada contributed over a third to the country’s gross domestic product.

In an interview with Reuters, Dan Kelly, CFIB president, said, “There are tens of thousands, if not hundreds of thousands, of businesses that remain viable but will not be able to outrun their debt.”

Many debts could only be repaid by borrowing at a higher interest rate from banks, he added.

Stephen Tapp, chief economist at the Chamber of Commerce, said, “We do anticipate a rise in insolvencies over the next six months or so.”

Consumer spending in Canada in 2024 on a per capita basis is expected to decline further from last year, according to the independent think tank Conference Board of Canada (CBC).