The economy of the world’s biggest energy exporter is heading for its deepest slump in more than 10 years due to the fallout from the coronavirus. A bigger crisis may be just around the corner.
Analysts at the Kremlin-funded Skolkovo Energy Center warned this month that the nation faces years of economic stagnation as demand for its carbon-heavy exports gradually drops. If Russia doesn’t adapt, budget receipts will “decline drastically” and growth may be limited to less than 0.8 per cent a year for the next two decades, less than a third of what the Economy Ministry is targeting.
President Vladimir Putin has relied on high oil prices as a backstop for economic growth — and his own popularity ratings – for most of his two decades at Russia’s helm. Now forecasters expect that the coronavirus recession will accelerate the decline in global fossil fuel use, with some even predicting that the peak was in 2019, about 15 years earlier than the Kremlin was expecting.
“Oil and gas are becoming just commodities, without the resource rents that were the main driver for the Russian economic miracle at the beginning of this century,” Tatiana Mitrova, director of the Skolkovo Energy Center, said by phone. The coronavirus crisis has likely made the think tank’s economic forecasts even bleaker, she said.
The Kremlin is showing no signs that it plans to move away from the current economic setup, under which almost half of budget revenues come from energy exports. Just this month, Rosneft chief executive officer Igor Sechin boasted to Putin about progress made at an Arctic oil exploration project and Gazprom began design and survey work on a new pipeline to China.
Crude prices have collapsed about 45 per cent since the start of the year as coronavirus lockdowns sap demand. Although the market has rebounded in recent weeks, the price of Russia’s export blend of Urals crude is still well below the $42 a barrel needed to balance the Russian budget.
“The rents that we enjoyed for the last 20 years will never come back,” Alexei Kudrin, the respected former finance minister and now a top government auditor, warned in an article in the Kommersant daily Monday. “That’s a huge challenge for all of economic policy.”
The International Energy Agency forecasts a plunge in global oil demand of 8.6 million a day this year, or about nine per cent, while solar and wind demand increase. The European Union, Russia’s biggest export market, wants to put a Green Deal to become climate-neutral by 2050 at the heart of its plan to recover from the coronavirus pandemic.
In a low-carbon development plan published in March, Russia’s Economy Ministry forecast that coal demand will peak before 2035, and oil demand before 2045. The ministry said Thursday it expects gross domestic product to grow 2.8 per cent next year and three per cent in 2022.
The plan envisages cutting the carbon-intensity of the Russian economy by nine per cent in the next decade. But greenhouse gas emissions – the fifth highest in the world – would still increase on current levels by the middle of the century.
“All of the countries that are highly dependent on fossil fuels have said ‘we must change’ for many years, but they haven’t done it because it’s hard,” said Kingsmill Bond, a strategist at London-based think tank Carbon Tracker. “It’s no longer a question of hope, it’s a question of necessity because people just won’t want these highly-priced fossil fuels any more.”
Security Threat
Kirill Tremasov, the head of research at Loko-Invest in Moscow who is about to take up a new role as the head of the central bank’s monetary policy department, warned in a a Youtube post Friday that an acceleration in global decarbonization poses a major risk to growth. Just over a week earlier, Anatoly Chubais, the architect of Russia’s privatizations in the 1990s, said the drop in oil demand is a threat to the country’s national security.
Russia ranks 109th in the world for renewable energy capacity, according to BloombergNew Energy Finance. The Energy Ministry aims to increase the share of renewable energy in power generation from under one per cent currently to 2.5 per cent by 2024, a fraction of what other countries are planning.
“Nobody raises these questions with Putin, nobody can,” said Georgy Safonov, head of the Center for Environmental and Natural Resource Economics at Moscow’s Higher School of Economics. “Russia is like a huge ship that is moving in the wrong direction. If someone wants to improve part of it, it poses a risk to the whole ship.”
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.
