A crude oil terminal near the Black Sea port of Novorossiisk, Russia, on Sept. 21, 2021.CPC/Reuters
The images taken by a drone of Maryinka, near Donetsk in southeastern Ukraine, present a hellscape reminiscent of the Allied firebombing of Dresden near the end of the Second World War. Maryinka lies in smoking ruins, with barely a building or tree intact. Vast swaths of the city, which once had a population of 10,000, have been flattened.
Maryinka’s “liberation” by Russian forces in December and into January (there are reports that Ukrainian soldiers still hold a few parts of the city) not only highlights the tragedy of Russia’s war of choice against Ukraine but also the appalling economic costs of rebuilding the country.
Suppose Russia, which is thought to be preparing a mass offensive, manages to keep the bits of eastern Ukraine that it now occupies. It would face paying the equivalent of tens of billions of dollars to rebuild the cities and towns it wiped off the map. It would also find itself stuck in a costly guerrilla war that could drain the Kremlin’s finances for years – or decades (see the Soviet occupation of Afghanistan).
For much of 2022, Moscow probably thought it could afford to pay all these bills, even if a war that was supposed to be over in weeks refused to end. That’s because the country’s main exports – oil and natural gas – continued to fatten the Russian treasury, even as most of Western and Central Europe cut back, then almost eliminated, the purchase of those fuels from Russia.
The prices for oil and gas kept going up, keeping Russian President Vladimir Putin’s revenue stream not only intact but growing. The Russian central bank recently reported that the current account surplus (the surplus of exports over imports) in the first 11 months of 2022 more than doubled, to US$226-billion. Yes, Russia ran a budget deficit last year, but not a crushing one, and the ruble recovered remarkably well after its plunge against the dollar shortly after the invasion started last February.
Rather suddenly, the financial calculus is going against Russia just as the Russian recession deepens and the war bills, for things such as hiring tens of thousands of ruthless Wagner Group mercenaries, pile up in Mr. Putin’s office.
Let’s start with oil. Oil prices of the Brent crude variety peaked at US$133 a barrel last March. It has been downhill ever since; Brent is now trading at about the same price it was this time last year – US$87.
Russia, the world’s second-largest exporter of crude, could make tanker loads of profit at that price. Problem is, Russia is not getting anywhere near that price for its benchmark Urals crude. With Europe and North America not buying Russian oil any more, India and China have emerged as its main buyers and are demanding enormous discounts. Earlier this month, Urals was selling at less than US$40 – half the world price and well below the US$60 price cap imposed on Russian oil by the G7 in December.
At the same time, Russia’s other cash machine, the European gas market, is all but dead. The underwater explosions in September that wrecked the Nord Stream 1 and Nord Stream 2 pipelines connecting Russia to Germany eliminated most Russian gas exports to Europe. While Moscow is sneaking some gas into Europe through Turkey, the prices for that supply are falling, thanks partly to a warm winter. In December alone, European gas prices fell by half, though they are still well above their long-term average.
The upshot is that falling oil and gas exports, and prices, are eating a big hole in the Russian budget. Various economist and strategists have estimated that Russian energy receipts will be about US$150-billion lower this year than last, virtually eliminating the current account surplus and pushing up the budget deficit. Earlier this month, Russia’s Finance Minister put the 2022 deficit at 2.3 per cent of GDP, from the prewar forecast of a 1-per-cent surplus. And the deficit could double this year, even triple, as war spending accelerates.
Add in the sanctions, the mobilization that has forced hundreds of thousands of men into the military – leaving the labour market short of workers – the inability to import crucial technology to keep factories going and the exodus of Western companies, and returning to growth any time soon seems impossible, all the more so since Russia must spend fortunes to replenish the military hardware that Ukrainians destroyed. The 12-per-cent fall in the ruble since early December says Russia’s economic fortunes are going into reverse – fast.
Mr. Putin probably knows that his country’s financial health will keep deteriorating, to the point that Moscow may not be able to afford a prolonged campaign in Ukraine, let alone rebuild any territories it might manage to keep. This supports the theory that he will launch a monster offensive by the spring to try to end this war on his terms. Ukraine expects as much and will do its best to ensure that, economically at least, Russia becomes a failed state.
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.
:format(jpeg)/cloudfront-us-east-1.images.arcpublishing.com/tgam/OZWZ7TY4WJJMXLJ7NSDD7IZ3ZY.JPG)
