How much debt have Canadians taken on to survive during COVID?
And with the end of the pandemic in sight — sort of — what will happen next?
According to Statistics Canada, things were not ideal even before COVID, with 30% of Canadians believing they were over-indebted in 2019. Then came the pandemic.
Insolvency filings went up at the beginning of the year, but 2020 finished with record lows, despite lockdowns and layoffs. Debt was deferred.
Going into the pandemic, Canada’s debt-to-income ratio was 180.4%. The average consumer owed almost $30,000 in non-mortgage debt.
Insolvencies were rising and had been since the end of 2018.
When COVID hit, the federal government held off financial chaos with CERB and wage subsidies, income supports that helped an estimated 50% of adult Canadians.
People deferred payments on everything from mortgages and credit cards to car loans and commercial rents.
With courts closed and debt collectors sidelined by COVID, everything was put on hold.
Insolvencies reached a 20-year low. (Alas, Statistics Canada notes that non-mortgage loans have increased steadily since May of 2020 and will soon be back to pre-pandemic levels.)
But deferrals are coming to an end, and government supports will not last forever. The economy is not predicted to be back in full swing until late this year or 2022; in the meantime, insolvencies will start to rise.
“Insolvencies will return as the economy recovers. It seems counter-intuitive to many, but if you don’t have an income or assets that can be seized by creditors, there is no need to file insolvency,” said Hoyes in his 2020 summary.
“Until economic growth is no longer driven primarily by consumer spending paid for with debt, until more Canadians can stop living paycheque to paycheque and using credit to survive, consumer insolvencies will inevitably return,” Hoyes added.
Asked to do a little crystal-ball gazing for the future, Hoyes said there are two schools of thought at the moment.
One is that with the vaccine and most people inoculated by Labour Day, we’ll quickly get back to normal. The pandemic will prove to have been a temporary blip.
“I do not subscribe to that theory,” said Hoyes.
“Yes, with the vaccine things will eventually get back to normal, but the world has fundamentally changed. Your favourite restaurant? It’s not reopening. Maybe not that nail salon or small fitness studio either. Others may replace them, but not to the same degree,” he said.
For some workers, then, change will be huge.
“For a 60-year-old chef, life is not going back to normal. That chef, if he used credit cards to survive the last year, might be one of my clients,” Hoyes said.
On the other hand, said Hoyes, if that chef retires, nobody can garnishee his wages because he won’t have any.
“People file for bankruptcy or do a proposal to get protection from their creditors. They do so because they’re afraid their wages will be garnisheed or they’ll be sued, or they’ll lose their house, ” Hoyes said.
With no wages and no house (i.e. nothing to lose) you likely wouldn’t file. And creditors have to take action within two years of when payments stopped.
“And the courts are still mostly closed and collection agents are still working from home. A lot of the big banks may decide, ‘What’s the point?’
“There will be fewer clients in my line of work,” Hoyes said.
As the economy recovers, Hoyes said it’ll be tough on people in their 50s and 60s who are not quite ready for retirement.
And tough on young people just finishing university, he said. A lot of experience will be lost in the way of hands-on learning and mentoring because of the way the world has changed.
People who’ve been deferring debt have more to think about and are potentially more at risk, said Hoyes.
Certainly, many Canadians, mostly middle income, will feel the debt impact of COVID-19 for years to come. Financially, “the guy in the middle will suffer most.That chef who used to earn $3000 a month is now getting 1800 on EI.”
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.
OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.
The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.
Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.
Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.
Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.
In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.
This report by The Canadian Press was first published Nov. 5, 2024.
