Question

Canada's economy is heavy in both resources and services. Given the impact of COVID-19 on demand across many industries, what do you think this will do to Canada's economy through 2020? Discuss among your group, and consider these additional questions:

1. What will happen to the many small service-oriented business in Canada?
2. What will happen to the resource industries, such as mining, fisheries, lumber and oil? write 200 words

Answer 1

Canada Economy after the impact of COVID 19

The great lockdown of 2020 to slow the spread of COVID-19 has pushed the world’s economies into a crisis “like no other,” the International Monetary Fund warned Tuesday in a sombre report that predicts the largest economic contraction in Canada since 1921.

It is “very likely” the global economy in 2020 will suffer its worst recession since the Great Depression, the decade-long downturn that followed the 1929 stock market crash in the U.S., IMF chief economist Gita Gopinath said in a foreword to the fund’s latest half-yearly forecast.

She said the economic pain will easily surpass that seen during the global financial credit crunch a decade ago and could produce a cumulative loss to global gross domestic product of $9 trillion (U.S.). Gopinath said the crisis is hurting both advanced and developing countries, with rich western economies seen contracting by an average of 6.1 per cent. Emerging market and developing economies are also projected to have negative growth rates of minus 1.0 per cent in 2020, she said.

The 189-nation IMF is projecting the global economy overall will shrink by 3 per cent in 2020, rather than expand by 3.3 per cent as it predicted at the start of the year. That would be a much more serious contraction than the 0.1 per cent squeeze seen in 2009, the worst year of the previous recession.

In Canada, where the Parliamentary Budget Office last week said the 2021 federal deficit would balloon to $184 billion (Cad.) or 8.5 per cent of GDP, the IMF predicts the economy will shrink by 6.2 per cent in 2020, and then rebound to 4.2 per cent growth in 2021. That’s assuming the pandemic fades in the second half of the year and containment efforts can be gradually unwound.

The fund sees economic contraction this year of 5.9 per cent in the U.S., 7.5 per cent in the 19 European countries that share the euro currency, 5.2 per cent in Japan and 6.5 per cent in the United Kingdom.

Canada’s economy has faced a double hit, from both COVID-19 and collapsing oil prices, economists note. More than two million Canadians, or one in 10 workers, have made jobless claims since the start of nationwide lock downs in March.

A 6.2 per cent decline in GDP for Canada would be significantly bigger than the just over 1 per cent contraction the IMF forecast for the country after the 2008 financial crisis, and would mark the biggest annual fall since 1921.

Senior Canadian bank economists, however, caution that economic forecasts vary widely and say the IMF’s numbers should not be treated as the only correct prediction.

“People, frankly, are all over the map,” said BMO chief economist Doug Porter. “I would say while these are reasonable estimates, they’re more toward the negative range. But it doesn’t mean they’re wrong.”

BMO had previously forecast a smaller 4 to 5 per cent decline for Canada’s GDP this year.

Economists said there could be a very modest recovery in the latter half of this year, with a strong rebound next year, though that too will depend on whether there’s a subsequent wave of the virus. It will also likely take longer than a year for the unemployment rate to again reach pre-COVID-19 levels.