Italy was the first European country to report a major surge in cases of the coronavirus, with numbers quickly climbing into the hundreds.
The authorities have responded with travel restrictions in the north of the country that are bound to hit the economy.
So far, a number of towns in Lombardy in northern Italy have been locked down, with very limited numbers of people being allowed in or out.
That matters, because northern Italy is the country’s industrial powerhouse. Lombardy alone accounts for 40% of Italian industrial output. Milan is Italy’s key centre for finance and a range of other services.
Milan is not one of the areas covered by the shutdown. But even so, major tourist and cultural sites such as the cathedral (the Duomo) and the opera house La Scala have been closed.
Milan is also one of the world’s major fashion centres. Fashion Week in late February did survive – after a fashion, as it were – but it was affected. For instance, Giorgio Armani’s collection was shown without an audience.
Had the coronavirus arrived a few weeks earlier, it seems likely there would have been much more disruption to this major event in Milan’s calendar.
There is some debate about whether the response in Lombardy has been too aggressive. But it is certainly true that public perceptions, well founded or not, translate into decisions about whether to travel or go out that have a real impact on businesses.
Persistent problem
Italy has struggled with persistently slow growth for many years. So could this health crisis be the factor that tips the country into another recession?
By any measure, the Italian economy is in a bad way.
In 2019, total production of goods and services was approximately the same as it was 15 years earlier. What’s more, it was still 4% below the level it reached in 2007, just before the financial crisis.
Unemployment is also a persistent problem, especially among young people. The unemployment rate among under-25s is 28.9%, with only Spain and Greece having higher figures in the EU.
In the last two years, Italy has also had to contend with weaker global growth and a slowdown in international trade. In the final quarter of last year, GDP fell by 0.3%.
Prof Roberto Perotti of Bocconi University in Milan says more of the same is now in prospect:
“GDP will almost certainly shrink this quarter as well, so Italy will technically be in a recession [often defined as two consecutive quarters of declining GDP]. It will probably shrink for the whole year,” he says.
Tourism woes
It is true that even without the virus, another contraction in the current quarter would have been a distinct possibility. But the odds have strengthened now that economic activity will be hit by the health crisis.
How severe it will be for Italy obviously depends on the unknowable (at this stage) course of the disease.
How it affects tourism will be an important factor. This is not the main season, apart from skiing in the mountains. The areas affected so far are not the main tourist areas. But as the summer approaches and if the virus spreads to other areas of Italy, that could change.
Already some flights to northern Italy have been cancelled. EasyJet, for example, said it was a response to “softening demand” – in other words, people choosing not to go there.
Prof Perotti thinks that tourist numbers will go to almost zero in the near future. And even if the virus problem goes away by the summer, the industry won’t quickly get back to normal. “Tourism,” he says, “has a long memory.”
He thinks the overall impact on Italy will depend to a large extent on how the big economies react, notably the US and Germany.
The message from Prime Minister Giuseppe Conte is: “It’s time to stop the panic.” He has called on the national broadcaster to tone down its coverage.
Financial squeeze
One consequence of Italy’s protracted sluggishness has been stretched government finances. Its government debt is equivalent to 133% of GDP.
In the EU, only Greece exceeds that figure. EU rules for the government finances set a target of 60% or less. Several other countries are above that threshold, but Greece and Italy stand out. So Italy could really do without additional stress on its government finances.
Prof Perotti thinks the virus could aggravate that problem: “The direct cost of the health intervention, I don’t think is huge. Now if there is a big recession, the lost revenue from that will be a big issue.”
Weaker economic activity will mean less tax revenue. Prof Perotti thinks the government will use it as an excuse to get more leeway in the continuing discussions that Italy is having with the European Commission about getting its finances into line with the rules.
But Italy probably can’t expect very much help from monetary policy, which is in the hands of the European Central Bank. Interest rates are already very low: one of the ECB’s main rates is below zero. In any event, Prof Perotti thinks it will only act if “things get very ugly for the whole of the eurozone”.
At the moment, Italy looks like the economy most exposed to the consequences of the new coronavirus and one with many other pre-existing challenges. But if the spread continues, then Italy might not look like such a special case for long.
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.
