Issued on: 01/12/2021 – 04:12Modified: 01/12/2021 – 04:10
Paris (AFP) – The world economy woke up from its pandemic-induced coma in 2021, but soaring inflation, global supply chain bottlenecks and a resurgent coronavirus have taken the shine off the comeback.
Now growth is at risk of weakening next year.
Here is a look at the state of the global economy:
Uneven recovery
Countries have posted impressive growth figures as they clawed their way out of the depths of the 2020 Covid-induced recession, but some are faring better than others as wealthier countries have had better access to vaccines.
The United States has overcome its worst downturn since the Great Depression while the eurozone’s economy could return to pre-pandemic levels by the end of the year.
But a resurgence of the coronavirus could scupper the recovery, with the emergence of the Omicron variant raising new concerns.
“Covid-19 will remain a public health threat, particularly in countries where vaccination rates remain low,” said analysts at Moody’s credit ratings agency.
Many US employers had difficulty hiring enough employees to meet recovering business demandMARIO TAMA GETTY IMAGES NORTH AMERICA/AFP/File
With a 2.5 percent vaccination rate, the economy of sub-Saharan Africa is growing at a slower click, according to the International Monetary Fund.
Most emerging and developing countries should remain far behind their pre-pandemic forecasts by 2024, the IMF says.
Central banks in Brazil, Russia and South Korea have raised interest rates to combat rising inflation, a move that could rein in growth.
China, the world’s second biggest economy and a driver of global growth, is facing a slew of risks: New coronavirus cases, an energy crunch and fears over the debt crisis at real estate giant Evergrande.
Inflation soars
Inflation has accelerated to multi-year highs around the world, as consumers returned with a vengeance and industries faced shortages.
Prices have soared across the board, with oil, natural gas and raw materials such as wood, copper and steel going through the roof.
“The biggest surprise of 2021 has been the goods-led inflation surge,” Goldman Sachs analysts wrote in a 2022 outlook.
Central banks insist the inflationary pressure is a temporary consequence of economic activity returning to normal this year after it came to a halt when the pandemic erupted in 2020.
US inflationEléonore HUGHES AFP/File
Stock markets have hit new record highs this year, but investors are concerned that central banks will withdraw their stimulus programmes and raise interest rates earlier than expected to tame inflation.
“The question is whether we really are in the end of the crisis,” said Roel Beetsma professor of macroeconomics at the University of Amsterdam.
Widespread shortages
Industries have struggled to keep up with a surge in demand from consumers.
Global trade has been disrupted by insufficient shipping containers, congestion at ports and labour shortages.
One key component that is hard to come by these days is semiconductors, chips used in everything from phones to video game consoles to the electronic systems of cars.
Shortages of computer chips held back production of cars and some consumer goodsJENS SCHLUETER AFP/File
The shortage has been so bad that several automakers have had to temporarily halt production at some factories.
Labour shortages have added to the problem as truck drivers, port workers and cashiers have not returned to work following lockdowns.
Despite the difficulties, the IMF expects the world economy to grow by a healthy 4.9 percent next year.
Climate change
In addition to the pandemic, economies had to come to grips with another life-threatening event this year: climate change.
The conflict between economic growth and saving the planet came to the fore at the COP26 climate summit in Glasgow, Scotland, this month.
Nearly 200 nations signed a deal to try to halt runaway global warming after two weeks of painful negotiations, but fell short of what scientists say is needed to contain dangerous rises.
Fires during heatwaves which experts have linked to climate change have caused much damage in parts of Europe and the United StatesANGELOS TZORTZINIS AFP/File
Droughts and other climate catastrophes threaten to further drive up food prices, which jumped to a 10-year high in October, according to the Food and Agriculture Organization.
Wheat has soared by 40 percent in the past year while dairy products are up 15 percent and vegetable oils reach new records.
“It’s pretty obvious. Everything has gone up,” said Nabiha Abid, a resident of Tunisia’s capital, noting that the price of meat has doubled.
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
