The world economy faces sharply divergent growth prospects across various regions, as prospects of a uniform swift snapback from a dismal 2020 have become clouded. The latest update of the Brookings-Financial Times Tracking Indexes for the Global Economic Recovery (TIGER) reveals grounds for optimism about global growth prospects but also renewed concerns about impediments to a strong recovery. Vaccination euphoria and attendant hopes of a rapid, broad-based recovery have been tempered by a fresh COVID-19 wave sweeping through a number of economies, putting their growth trajectories at risk.
The U.S. and China are shaping up to be the main drivers of global growth in 2021. Household consumption and business investment have surged in both economies, along with measures of private sector confidence. Industrial production has rebounded in most countries, contributing to firming commodity prices and robust international trade. However, the U.S., China, and India are likely to be the only major economies (along with Indonesia and South Korea) that exceed pre-COVID-19 GDP levels by the end of 2021. In most other regions, the scarring effects of the 2020 recession on both GDP and employment are likely to be longer-lasting.
The U.S. economy is poised for a breakout year as massive fiscal stimulus, loose monetary policies, and pent-up demand power rapid GDP growth. Renewed consumer and business confidence have been reflected in generally strong consumption and business investment growth, while financial markets have continued to perform well. Labor market performance has been encouraging, although progress in job growth and unemployment reduction has been uneven in recent months.
Click a country name below the Composite Index to view charts for the main TIGER indexes by country.
Separating the imminent phantom increase in inflation (due to base effects from a weak 2020) from underlying wage and price pressures will complicate monetary policy during 2021. Parsing the rise in government bond yields—which reflects a combination of better growth prospects, risks of inflation, and concerns about rising debt levels—encapsulates the challenges that policymakers face as they try to decipher and manage market expectations. Any additional stimulus measures should ideally aim to simultaneously boost aggregate demand and improve long-term productivity.
China’s growth momentum has stayed strong and balanced, with the government’s attention turning to medium-term structural issues and containment of financial system risks. The recent National People’s Congress meeting ended with a renewed focus on rebalancing demand toward household consumption and shifting growth sources toward high-end manufacturing, the services sector, and small and medium enterprises. The government seems to be leaning toward normalization of macroeconomic policies, with a lower fiscal deficit and some tightening of monetary policy anticipated later in the year. This is being backed up by prudential regulatory measures to manage frothiness in the real estate sector. Trade tensions with the U.S. now appear likely to persist under the Biden administration, but this no longer seems a major factor influencing private sector sentiment or growth in either country.
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European economies, both in the core and periphery of the eurozone, are struggling as they cope with another wave of COVID-19 infections, floundering vaccination programs, and a lack of policy direction. While industrial production, particularly in Germany, has held up well, much of the eurozone might return to pre-COVID-19 GDP levels only by late 2022. The U.K., which in 2020 faced a double whammy from Brexit and COVID-19, has made good progress on vaccinating its population and improved its growth prospects. Japan’s recovery appears fragile. Despite extensive stimulus measures, weak consumer confidence is restraining consumption while export growth has been subdued.
In India, both the manufacturing and services sectors are contributing to a strong rebound.
However, a resurgence of the virus and limited policy space due to high public debt levels and rising inflation could erode some momentum. The rebound in oil prices has buoyed the prospects of countries such as Nigeria, Russia, and Saudi Arabia. Meanwhile, Brazil’s economy is tottering as the virus spreads unchecked and ineffectual political leadership hampers a concerted response. Turkey faces similar concerns, although it was one of the few economies to register positive growth in 2020. In short, even among emerging markets, there are multiple tracks to the recovery.
Following a marked decline during 2020, the U.S. dollar has firmed up in 2021. In tandem with the upward shift in U.S. bond yields, this portends ill for many emerging market and other developing economies, particularly those with heavy foreign currency debt exposure. Financial market pressures could build up if divergent growth patterns, with more vulnerable economies registering weaker growth, persist through 2021.
Policymakers around the world face an important pivot point. One decision many countries are grappling with is whether to open up their economies despite the continued spread of the virus. Another is whether to infuse additional macroeconomic stimulus, risking an unfavorable tradeoff between short-term benefits and longer-term vulnerabilities. Uncertainties are rife and the stakes are high. Indecisive policies are affecting consumer and business confidence in the weaker economies, adding to economic strains.
The recipe for a strong and durable recovery remains the same as it has over the past year—resolute measures to control the virus coupled with balanced monetary and fiscal stimulus, with an emphasis on policies that support demand as well as improve productivity. In economies that are doing well, it is far too early to ease up in either dimension while in others policymakers will need to redouble their efforts.
OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.
Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.
The change is scheduled to come into force on Nov. 8.
As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.
The program has also come under fire for allegations of mistreatment of workers.
A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.
In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.
The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.
According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.
The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.
Temporary foreign workers in the agriculture sector are not affected by past rule changes.
This report by The Canadian Press was first published Oct. 21, 2024.
OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.
However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.
The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.
Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.
The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.
The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.
This report by The Canadian Press was first published Oct. 17, 2024.
OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.
In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.
The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.
Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.
In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.
It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.
This report by The Canadian Press was first published Oct 16, 2024.
