Alberta’s economy is expected to suffer an 11.3 per cent decline in 2020, the worst in the country, according to a new Conference Board of Canada report that projects the COVID-19 induced recession will hit Canada nearly twice as hard as the group initially thought.
The last time that the board wrote an outlook report was near the height of the pandemic in April when the country was still shut down and economists’ forecasts were clouded by uncertainty. The organization estimated that Canada was heading for a 4.3 per cent GDP contraction by the end of 2020. Four months later, it’s clear the damage will be much worse than initially thought as the board now says Canada is heading for an 8.2 per cent GDP decline by the end of 2020.
“Initially, we thought this would last from March to perhaps June and July and in the second half of the year, the economy would be fully back to operating normally — this is not the case at all,” said Conference Board of Canada chief economist Pedro Antunes after publishing his latest projections Monday. “What we’ve come to realize is the economy will be operating well below (pre-pandemic) levels.”
The board’s province-to-province breakdown was similarly altered. In April, it did not foresee a GDP loss for any province hitting six per cent — the projection of a 5.8 per cent drop for Alberta was the highest. The only three provinces the board expects won’t surpass that number now are Manitoba, P.E.I. and B.C.
Alberta’s deeper decline is due to the “double whammy” of the lockdown and the crumbling of oil prices. West Texas Intermediate prices were hovering above US$50 in February before falling deep into negative territory. Crude prices have rebounded since but are still trading only around US$42.
“The outlook for oil prices over the next two years is quite pessimistic because of the impact on transportation which is a big user of oil,” Antunes said. “That affects profits and royalties the government will have to forgo, but the biggest impact … is the capital investment. Firms have cut down to the bare bones.”
Business investment is not expected to pick up again until Spring 2021, while a stark decline in household spending won’t be corrected until 2022.
Other provinces that rely heavily on the oil-and-gas sector, namely Newfoundland and Saskatchewan, are in a similar position and the board expects them to lose 7.1 per cent and 8.6 per cent of GDP respectively.
The board initially expected the downturns in Ontario and Quebec to result in GDP contractions of 3.2 per cent and 3.8 per cent, but those projections have now been revised to 7.6 per cent and 7.2 per cent.
Quebec was the worst-hit province in terms of the total number of COVID-19 cases and deaths, but the damage to its economy would have been worse if not for the government’s decision to begin the reopening process earlier than others, the report said.
The province’s crucial aerospace industry, in particular, may have a long wait ahead before it can fully recover. Air travel, the report said, likely will not return to normal levels until late 2021 or 2022.
For Ontario, it’s the automotive industry that’s troubled. The report estimates that auto sales plunged by close to 60 per cent this year due to a drop off in exports to the U.S. The province’s recovery will continue to be tied to the U.S. and its ability to keep cases under control. If it cannot do so, Americans won’t exactly be flocking to car dealerships, the report said.
“Even with the rebound starting in the third quarter … it will take until the end of next year for the economy to return to its pre-pandemic level of output,” the report said.
Copyright Postmedia Network Inc., 2020
Hungary extends loan moratorium as economy struggles to recover from pandemic – The Guardian
By Krisztina Than
BUDAPEST (Reuters) – Hungary will extend a moratorium on loan repayments for some households and companies until the middle of 2021, as its finance minister warned the economy could struggle to grow next year unless a coronavirus vaccine is found.
Prime Minister Viktor Orban introduced the moratorium for all companies and private borrowers in March as one of his government’s key measures to help reduce the economic fallout from the pandemic. It was due to expire at the end of the year.
In a video posted on his official Facebook page on Saturday, Orban said the moratorium would be extended by six months for families with children, the retired, unemployed and those in public works programmes.
The extension until the middle of 2021 will also apply to companies that have seen revenues drop by at least 25%.
Orban also said loan contracts for all households and companies agreed before the pandemic could not be terminated for six months.
The moves come as the government prepares to announce more steps to try to revive growth, after the economy plunged more than expected in the second quarter and prospects for a recovery next year have worsened.
The weak economic outlook could represent the biggest threat to nationalist Orban’s decade-long rule as he prepares to face parliamentary elections in the first half of 2022.
Finance minister Mihaly Varga said in an interview published earlier on Saturday that if a coronavirus vaccine was not available by the middle of 2021 the economy might struggle to grow next year, based on a pessimistic scenario.
Under an optimistic scenario, the economy could grow by 4-5% if a vaccine was available in the second quarter, he told newspaper Magyar Nemzet.
A third scenario was for a protracted recovery with 3%-4% growth, also conditional on a vaccine being available, he added.
Hungary’s economy is expected to shrink by 5%-6% this year.
Varga said the government was working on new stimulus measures that could include targeted tax cuts for crisis-hit sectors.
After a spike in new cases in recent weeks, Hungary reported 809 new coronavirus infections on Saturday, bringing the total to 16,920, with 675 deaths.
(Reporting by Krisztina Than; Editing by David Clarke and Mark Potter)
Why falling immigration isn't that bad for the economy during COVID-19 – Yahoo Canada Finance
COVID-19 travel restrictions have put a big dent in immigration, widely seen as something the economy relies on, but the negative effects aren’t as bad as they might seem.
The latest government numbers show 13,645 fewer permanent residents came to Canada in July, down 63 per cent from the same month last year. April and June were similarly weak periods, making the likelihood of reaching the federal government’s target of 341,000 less likely.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.” data-reactid=”18″>For a country like Canada with an aging population and relatively low population growth, immigration is needed to counter demographic headwinds. But the pandemic’s effects more generally, far outweigh the specific negative effects of lower immigration.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada. ” data-reactid=”19″>“I think we need to keep the incremental impact of new immigration on economic growth in perspective. Even at its maximum pace in recent years, it was adding roughly 1 per cent to population per year and roughly the same to the labour force.” BMO chief economist Doug Porter told Yahoo Finance Canada.
“So, even a complete shutdown of immigration would (roughly) shave 1 percentage point from growth (or a bit less). Not small by any means, but that compares with what could be a 6 per cent drop in GDP (OECD said -5.8 per cent for this year, we are looking at -5.5 per cent).”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.” data-reactid=”21″>Around 1.1 million Canadians are still out of work, so immigrant workers aren’t exactly in high demand these days.
“Overall, given the realities of COVID and the now-soft demand for labour, the cool down in immigration by itself will not be particularly harmful — and certainly less so than it would have been say a year ago.” said Porter.
Long term effects without immigration
Pedro Antunes, the Conference Board of Canada’s chief economist, also thinks the effects are mitigated in the short-term but that doesn’t mean the economy will be totally unscathed.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.” data-reactid=”25″>“Some sectors will be affected because immigration drives consumer spending, demand for housing, and other services directly related to increased population,” he told Yahoo Finance Canada.
However, he believes it’s more important to look at the long term repercussions of reduced immigration.
“Canada’s underlying capacity is dependent on private and public investment, adoption of technology and the number of workers (and the skills of those workers). We know from our prior research that without immigration, our labour force would be flat or declining (since exiting baby-boomers outnumber school leavers),” said Antunes.
“If immigration levels are reduced over a few years (we think 2020 and 2021 at least) the result is a long-lasting impact on our potential (or productive capacity).”
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.” data-reactid=”29″>Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Download the Yahoo Finance app, available for Apple and Android.” data-reactid=”30″>Download the Yahoo Finance app, available for Apple and Android.
EU looks to fast 5G, supercomputers to boost virus-hit economy – TheChronicleHerald.ca
By Foo Yun Chee
BRUSSELS (Reuters) – The European Commission on Friday urged the 27-country bloc to work together to speed up the rollout of fibre and 5G networks to boost the region’s virus-hit economy and secure its technology autonomy.
EU countries should develop a best practices toolbox by March 30 with the aim of cutting cost and red tape, provide timely access to 5G radio spectrum and allow for more cross-border coordination for radio spectrum for 5G services, the EU executive said.
The coronavirus outbreak showed how important internet services and 5G are, European digital chief Margrethe Vestager said.
“We have seen the current crisis highlight the importance of access to very high-speed internet for businesses, public services and citizens, but also to accelerate the pace towards 5G,” she said in a statement. “We must therefore work together towards fast network rollout without any further delays.”
The Commission also proposed a recommendation to boost research and activities to develop new supercomputing technologies.
“Keeping up in the international technological race is a priority, and Europe has both the know-how and the political will to play a leading role,” Internal Market Commissioner Thierry Breton said in a statement.
The Commission is investing 8 billion euros($9.46 billion)in the next generation of supercomputers.
(Reporting by Foo Yun Chee; Editing by Tomasz Janowski)
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