ECONOMIC WATCH: Canadian economy devastated by Covid-19

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OTTAWA, Ont. – Statistics Canada today issued a flash
estimate for GDP, showing a decline of 9% in March, marking the largest single
month decline ever seen since records were tracked beginning in 1961.

The agency’s flash estimate points to a 2.6% decline in the
first quarter. It issued its flash estimate due to the Covid-19 outbreak, but
StatsCan points out the data should not be expected to be as accurate as its traditional
GDP reports, which draw on more actual data.

Still, it offers a glimpse of the devastating toll the virus
is having on the Canadian economy.

“Economic disruptions have been both deep and widespread in
the month of March,” StatsCan said. “Among the hardest hit by social distancing
measures and government restrictions have been the travel- and tourism-related
industries, such as personal transportation, restaurants and accommodation.
Major declines have also occurred in personal services, retailing (other than
food), entertainment and sporting events, and movie exhibition. Working from
home and distance learning have been growing trends across society, however,
due to the suddenness and breadth of the shutdowns of government and education
facilities, the volume of output in these sectors, based on actual hours
worked, is calculated to decline dramatically.”

But not all sectors of the economy declined.

“Activity in the health sector, food distribution and online retailing and
streaming have been growing,” StatsCan reported. “Despite the collapse in oil
prices and the pullback in the sector’s investment activities, early
indications seem to show that the volume of oil and gas extraction and pipeline
transportation had not yet been substantially impacted in March as storage
facilities were still being filled.”

The Conference Board of Canada also issued a news release
this morning, saying “With the advent of the Covid-19 pandemic, Canada is in
the midst of an economic downturn unlike anything most of us have ever experienced.”

Downturn short-lived?

A preliminary forecast on provincial economic outlooks
predicts Canadian GDP will drop by 25% in the second quarter, marking the
steepest quarterly decline seen since the beginning of formal record keeping.

“Every province has fallen into recession. Our forecast expects that the downturn will be short-lived and growth will resume in the second half of the year, assuming businesses slowly reopen over the spring and summer.”

Alicia Macdonald, The Conference Board of Canada

“Physical distancing requirements as well as the closure of
non-essential businesses have brought a large portion of the economy to a
standstill,” said Alicia Macdonald, associate director, economic forecasting,
at The Conference Board of Canada. “As a result, every province has fallen into
recession. Our forecast expects that the downturn will be short-lived and
growth will resume in the second half of the year, assuming businesses slowly
reopen over the spring and summer.”

Key findings from the Conference Board report show: the
Canadian economy will contract 4.3% in 2020; Newfoundland will enter recession
this year, thanks in part to declining oil prices; P.E.I.’s economy will
contract 3% as tourism dwindles; New Brunswick will see a 3.3% contraction,
while Nova Scotia will pull back 3.6%; Quebec will see GDP contract 3.8% this
year, but should bounce back next year gaining 5.8% thanks to income support
programs; and Ontario’s GDP will fall 3.2% this year, marking one of the smallest
declines of all provinces, as the province’s workforce includes many
professional services workers who can effectively work from home.

The Western Canada perspective

In Manitoba, The Conference Board of Canada predicts the
economy is set to contract by 3.9%, as the pandemic weighs on household
spending and demand in key industries, including transportation equipment
manufacturing. Saskatchewan will be among the hardest-hit provinces with a 5%
drop in GDP expected this year, before rebounding 5.4% next year.

Alberta is facing the double-whammy of the Covid-19 outbreak
coupled with a severe contraction in oil prices. The Conference Board of Canada
is predicting a 5.8% decline in Alberta’s GDP this year, which would be the
worst annual decline on record. But it is anticipating a sharp rebound of 6.1%
in 2021. B.C.’s economy will contract by 3.2% this year, with a slowdown in
international trade affecting port and transportation activities.

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