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China Steps Up Loan Relief, Delays Risk Exposure to Help Economy – BNN

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(Bloomberg) — Chinese banks have offered relief on 3.9 trillion yuan ($551 billion) of loans since the outbreak of the coronavirus pandemic to help struggling small businesses and bolster an economy facing its worst slump in four decades.

Lenders have postponed taking principal repayments on 1.44 trillion yuan in loans to almost 800,000 small businesses and pushed back 65.4 billion yuan in interest payments as of May 31, according to a China Banking and Insurance Regulatory Commission official who asked not be named citing internal policy. Banks also rolled over 2.4 trillion yuan in financing to small businesses.

China’s $41 trillion banking system is at the forefront of propping up companies hurt by the outbreak of coronavirus and the impact from its global spread. Authorities are now pushing the financial industry to sacrifice 1.5 trillion yuan in profit this year by offering lower lending rates, cutting fees, deferring loan repayments and granting more unsecured loans to small businesses.

As part of the forbearance polices, banks have been granting payment delays on loans maturing after Jan. 25 and regulators recently extended the deadline on the preferential policy to March 31 next year.

Still, under current accounting rules, banks can book the interest income when they were due even though the actual repayments were delayed, the CBIRC official said, adding that such risks haven’t been reflected in banks’ profits and there will be a lag in the risk exposure until later this year or next year.

Chinese banks reported a 5.6% increase in profit in the first quarter as an expansion in loans and bond investments boosted interest income while payments holidays curbed bad loan recognition. By comparison, the economy contracted 6.8%.

©2020 Bloomberg L.P.

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Liberal government to spend $10B on infrastructure to fuel pandemic economic recovery – CBC.ca

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The Liberal government is spending $10 billion on infrastructure initiatives such as broadband, clean energy and agricultural projects — part of a plan to boost growth and create one million jobs after the pandemic pummelled the economy.

Prime Minister Justin Trudeau and Infrastructure Minister Catherine McKenna are announcing details of the Canada Infrastructure Bank (CIB) plan during a news conference today and CBCNews.ca is carrying it live.

Trudeau said the three-year plan is expected to create 60,000 jobs.

“With smart, targeted investments, we can get people back on the job, grow the economy while building a healthy, sustainable future for everyone,” he said.

The plan has five major initiatives: 

  • $2.5 billion for clean power to support renewable generation and storage and to transmit clean electricity between provinces, territories and regions, including northern and Indigenous communities. 
  • $2 billion to help connect about 750,000 homes and small businesses to broadband in under-served communities. 
  • $2 billion for large-scale energy efficient building retrofits.
  • $1.5 billion for agriculture irrigation projects to boost production, strengthen Canada’s food security and expand export opportunities.
  • $1.5 billion to speed up the adoption of zero-emission buses and charging infrastructure. 

The Liberal government’s throne speech promised to create more than one million jobs to rebuild from the pandemic.

The $10 billion announced today is part of the CIB’s $35-billion pot of federal investments.

McKenna said the pandemic created a time of crisis, but also a time of opportunity to rebuild with stronger, cleaner, more inclusive communities. She said the investments align with the federal vision to build clean, modern communities.

“Canada has an opportunity to be the low-carbon economy that global investors beat a path to,” she said.

CIB chair Michael Sabia said the federal funding is meant to leverage additional money from private and institutional investors, stretching each public dollar into several.

“That is value for taxpayers,” he said.

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P.E.I. economy in 'better spot' than anticipated, says finance minister – CBC.ca

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A fiscal update for P.E.I. delivered Wednesday shows the Island coping relatively well with the economic consequences of the pandemic, says Finance Minister Darlene Compton.

Compton spoke to Island Morning host Mitch Cormier about the update Thursday.

“We are actually in a better spot than we thought we would be,” Compton said.

“There’s some good news stories through this. Construction is up 7.3 per cent year to date. Housing starts are up 13 per cent through the second quarter of 2020. Farm cash receipts are at a record high.”

The government is forecasting the economy will shrink 3.9 per cent in 2020, an improvement over the spring projection of 5.1 per cent. But the government’s projected deficit is climbing, up $5.4 million to $178.1 million.

The sector suffering the most is tourism.

“Accommodation, food and beverage services, are definitely down and that’s the biggest pocket that is struggling through this pandemic,” said Compton.

The summer season is looking like it could be down as much as 60 per cent. Growth in other sectors, however, is balancing that out for the economy overall, said Compton.

Chaotic labour economy

The labour economy has been volatile.

Thousands left the labour market in April, and returned in large numbers in June only to leave again in the summer months. The unemployment rate has followed a similar path up and down, rising as high as 15.2 per cent in June and remaining in double digits since April.

Compton said she expects job numbers on the Island to return to something like a pre-pandemic norm this fall, even as the tourism sector continues to struggle.

As for the rising deficit, there are two main factors, she said.

One, the province has seen fewer federal dollars than expected, because some Build Canada projects are delayed. That has decreased projected revenue.

On the expenses side, pandemic costs have been higher than anticipated. That includes the cost of reopening schools.

Reopening schools has been costly. (CBC)

The province has set aside a $65 million contingency fund in the event of a second wave of COVID-19, said Compton.

Another factor working in the province’s favour, said Compton, is that bond raters have given P.E.I. stable ratings, which means interest rates on the debt won’t change. That will help keep finances under control.

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31.4% spring slide for a US economy likely to shrink in 2020 – Yahoo Canada Finance

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31.4% spring slide for a US economy likely to shrink in 2020

WASHINGTON — The U.S. economy plunged at an unprecedented rate this spring and even with a record rebound expected in the just-ended third quarter, the U.S. economy will likely shrink this year, the first time that has happened since the Great Recession.

The gross domestic product, the economy’s total output of goods and services, fell at a rate of 31.4% in the April-June quarter, only slightly changed from the 31.7% drop estimated one month ago, the Commerce Department reported Wednesday.

The government’s last look at the second quarter showed a decline that was more than three times larger than the fall of 10% in the first quarter of 1958 when Dwight Eisenhower was president, which had been the largest decline in U.S. history.

Economists believe the economy will expand at an annual rate of 30% in the current quarter as businesses have re-opened and millions of people have gone back to work. That would shatter the old record for a quarterly GDP increase, a 16.7% surge in the first quarter of 1950 when Harry Truman was president.

The government will not release its July-September GDP report until Oct. 29, just five days before the presidential election.

While President Donald Trump is counting on an economic rebound to convince voters to give him a second term, economists said any such bounce back this year is a longshot.

Economists are forecasting that growth will slow significantly in the final three months of this year to a rate of around 4% and the U.S. could actually topple back into a recession if Congress fails to pass another stimulus measure or if there is a resurgence of COVID-19. There are upticks in infections occurring right now in some regions of the country, including New York.

“There are a lot of potential pitfalls out there,” said Gus Faucher, chief economist at PNC Financial Services. “We are still dealing with a number of significant reductions because of the pandemic.”

In 2020, economists expect GDP to fall by around 4% , which would mark the first annual decline in GDP since a drop of 2.5% in 2009 during the recession triggered by the 2008 financial crisis.

“With economic momentum cooling, fiscal stimulus expiring, flu season approaching and election uncertainty rising, the main question is how strong the labour market will be going into the fourth quarter,” said Gregory Daco, chief U.S. economist at Oxford Economics.

“With the prospect of additinal fiscal aid dwindling, consumers, businesses and local governments will have to fend for themselves in the coming months,” Daco said.

The Trump administration is forecasting solid growth in coming quarters that will restore all of the output lost to the pandemic. Yet most economists believe it could take some time for all the lost output to be restored and they don’t rule out a return to shrinking GDP if no further government support is forthcoming.

So far this year, the economy fell at a 5% rate in the first quarter, signalling an end to a nearly 11-year-long economic expansion, the longest in U.S. history. That drop was followed by the second quarter decline of 31.4%, which was initially estimated two months ago as a drop of 32.9%, and then revised to a decline of 31.7% last month.

The slight upward revision in this report reflected less of a plunge in consumer spending than had been estimated. It was still a record fall at a rate of 33.2%, but last month projections were for a decline of 34.1%. This improvement was offset somewhat by downward revisions to exports and to business investment.

Martin Crutsinger, The Associated Press

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