The effects of COVID-19 are being felt well beyond the health and wellbeing of the community.
While keeping people safe should absolutely be the priority, we have to keep one eye on the economy. We are going to need to be able to function as a society once the fog of this pandemic lifts.
Perhaps the most difficult part to that is the fact the coronavirus is already unprecedented in our modern world in how it has shut down the economy.
It is estimated by many observers that the federal deficit will hit $150 billion, much of which is due to pandemic spending and economic packages and supports for the unemployed and businesses facing economic hardship.
The province is also looking to blow past any concept of sticking to their budget and last week asked Ottawa to use its financial weight to help provinces get a better rate on loans, adding Manitoba would be looking for $10 billion in loans.
It is worth noting, Canada will hardly be alone in this deficit spending and borrowing. The U.S. recently announced a $2 trillion COVID-19 package.
This is while the Canadian Federation of Independent Businesses last week estimated a third of Canada’s small- to medium-sized business would not survive COVID-19. On Monday, they were estimating 21% of small businesses in Manitoba will have difficulty paying rent next month with another 11% reporting they don’t know if they will be able to.
Loren Remillard, president and CEO of the Winnipeg Chamber of Commerce, said he has seen similar numbers in Winnipeg, noting a week and a half ago, a large number of businesses said they had enough cash to float the business for 30 days. After that, it was a big question mark
These businesses will be critical to recovery as they were in the crash of 2008.
“I believe it was 80-90% of the new jobs created post-’08 were led by the small- and medium-sized enterprises of this country — a million jobs created by those companies,” he said. “We recognize the role those businesses have played coming out of crises and driving our economy back to ensure the quality of life we all enjoy.”
The chamber has been successful in lobbying for better supports for businesses from the federal government, including $40,000 interest-free loans and improved funding for employment support packages.
Something that will be important to watch is how the energy economy in Alberta is crumbling. It still had not completely bounced back from the last recession when oil powers Saudi Arabia and Russia undercut the price of oil and it has been in free fall to single digits for the price of Alberta crude.
Like it or not, our financial fate is still largely tied to the Alberta oil fields. The further oil drops, the fewer rigs are in operation and the fewer oil workers are collecting their big paycheques. That means the less money there is heading east in equalization payments.
Manitoba has a much more diversified economy, but still collected more than $2 billion last year in transfer payments.
“That’s the big problem going forward,” said Phil Cyrenne, professor of economics University of Winnipeg. “Most of the equalization is central to funding the public service.”
As a silver lining to the crisis, COVID-19 will force companies to adapt to more efficient ways of operation. Specifically, we are discovering just how many people can work from home which will allow companies to examine just how big of an office footprint they need. They can run leaner and potentially more effectively.
It is also forcing more companies online who may not have been online previously, thus opening up new markets to them.
While this is seen as a survival tactic right now, encouraged by the chamber to their members, the impact could be huge going forward.
“If this had happened 10 or 20 years ago, the effects would be even way worse,” said Cyrenne. “I think technology has allowed us to escape even some of the constraints in some sectors.”
We have some awful times ahead of us, but there is a light at the end of the tunnel.
jaldrich@postmedia.com
Twitter: @JoshAldrich03
