Economy

Global economy may shrink almost 1% in 2020 due to coronavirus, U.N. warns – MarketWatch

Published

4 years ago

April 1, 2020

UNITED NATIONS — The global economy could shrink almost 1% this year due to the new coronavirus, a sharp reversal from the pre-pandemic forecast of 2.5% growth, the United Nations said Wednesday.

The U.N. Department of Economic and Social Affairs warned in a report that the decline could be even deeper if restrictions on economic activities extend into the third quarter of the year and if fiscal stimulus efforts don’t support income and consumer spending.

By comparison, it said, the world economy contracted 1.7% during the global financial crisis in 2009.

“Fears of the exponential spread of the virus — and growing uncertainties about the efficacy of various containment measures — have rocked financial markets worldwide,” the report noted, “with market volatility surpassing its peak during the global financial crisis and equity markets and oil prices plunging to multi-year lows.”

In the best-case scenario, the report said, moderate declines in private consumption, investment and exports will be offset by increases in government spending in the seven major industrialized nations and China, leading to global growth of 1.2% in 2020.

In the worst-case scenario, it said, global output would contract 0.9%, “based on demand-side shocks of different magnitudes” to China, Japan, South Korea, the United States and the European Union as well as a 50% decline in oil prices.

This scenario “assumes that wide-ranging restrictions on economic activities in the EU and the United States would extend until the middle of the second quarter,” the report said.

It said increasing restrictions on the movement of people and lock-downs in Europe and North America “are hitting the service sector hard, particularly industries that involve physical interactions such as retail trade, leisure and hospitality, recreation and transportation services.” Those sectors account for more than a quarter of all jobs in those countries, and as these businesses lose revenue, unemployment is likely to increase sharply, it said.

The report said the negative effects of current economic restrictions in richer developed nations will soon spill over into developing countries, which will see lower trade and investment.

The severity of the economic impact — “whether a moderate or deep recession” — will largely depend on the duration of restrictions on the movement of people and economic activities in major economies and on the size and impact of fiscal responses, it said.

“Urgent and bold policy measures are needed, not only to contain the pandemic and save lives, but also to protect the most vulnerable in our societies from economic ruin and to sustain economic growth and financial stability,” said Liu Zhenmin, the U.N. undersecretary-general for economic and social affairs.

The report said fiscal stimulus packages should prioritize health spending to contain the spread of the virus and should provide income support to households most affected by the pandemic.

But the outlook remains gloomy.

“A sharp decline in consumer spending in the European Union and the United States will reduce imports of consumer goods from developing countries,” the report said. “In addition, global manufacturing production could contract significantly, amid the possibility of extended disruptions to global supply chains.”

It noted that several automobile companies have announced large-scale production suspensions in Europe and the United States and many firms worldwide especially in the auto, consumer electronics and telecommunications industries “are facing shortages of intermediate components as exports from China contracted at an annual pace of 17.2 per cent in the first two months of the year.”

“More severe and protracted production disruptions would affect a large number of developing economies that are deeply integrated in global supply networks,” it warned.

Developing countries, particularly those dependent on tourism and commodity exports, also face face heightened economic risks, including an increasing likelihood of “debt-distress” for many commodity-dependent economies, it said.

The report said the recent collapse in global commodity prices is compounding the bleak fiscal outlook for many of these countries, which haven’t fully recovered from the after-effects of sharp commodity price declines in 2014-2016.

The report said the worsening pandemic is increasing deep-seated economic anxiety. “Even in many high-income countries, a significant proportion of the population do not have enough financial wealth to live beyond the national poverty line for three months, causing many to fear for their economic security,” it said.

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Economy

Statistics Canada reports wholesale sales higher in July

Published

14 hours ago

September 13, 2024

Anne Joseph

OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.

The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.

The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.

The personal and household goods subsector fell 2.5 per cent to $12.1 billion.

In volume terms, overall wholesale sales rose 0.5 per cent in July.

Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.

This report by The Canadian Press was first published Sept. 13, 2024.

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

Published

3 days ago

September 10, 2024

Anne Joseph

VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

Published

3 days ago

September 10, 2024

Anne Joseph

NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

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