Connect with us

Economy

Coronavirus pandemic will dictate Freeland’s plan for economy

Published

on

Perrin Beatty was on his way home from the office when his phone rang. It was Chrystia Freeland, who 24 hours earlier had become Canada’s finance minister.

For the president of the Canadian Chamber of Commerce, the call signaled how Freeland will approach her new portfolio — reaching out to multiple stakeholders and listening to ideas before embarking on a path forward.

“She’s hard-working. She’s accessible. She’s pragmatic,” Beatty said.

As much as some might see her as a change from Bill Morneau, who abruptly resigned Monday, there was no hint of a major shift in her earliest hours in the job.

When she spoke to reporters on Tuesday for the first time as finance minister, Freeland talked about going green, as well as equitable and inclusive growth.

 

Elliot Hughes, a former Morneau adviser now at Summa Strategies, said this suggests the Liberals plan to double down on their existing approach.

It was also in line with thoughts Freeland laid out in her 2012 book, Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else. She argued governments needed to be alert to extraordinarily wealthy people (think the 0.1 per cent) using their political and financial heft to enlarge their slice of the economic pie, rather than growing the pie itself.

Hughes said Canada’s business community might be surprised at how much she’ll want to help the private sector, despite her writings.

“Just because she has questioned the plutocrats … I don’t think that necessarily means she’s going to be anti-business,” Hughes said.

Hassan Yussuff, president of the Canadian Labour Congress, suggested Freeland would also ensure all new spending has a gender lens so women, who have been disproportionately affected by job and income losses, aren’t left behind in a recovery.

Programs like child care could find themselves potentially with more money, observers noted, because it would be a win-win scenario for the Liberals, opposition parties and provinces, many of whom Freeland worked with through free trade talks.

Yussuff and others said Freeland identified pressure points and political nuances on the American side to use as leverage during negotiations, all the while doing her homework and seeking input from businesses, labour, premiers and MPs.

“As hard as NAFTA negotiations were, and those were extremely difficult, leading Canada’s fiscal and economic rebound from COVID-19 is going to be even harder,” Hughes said.

Economic forecasts suggest that even by the end of 2021, the economy won’t be where it was at the start of 2020. Unemployment is expected to remain high. The government estimates four million people will use a series of income support measures announced Thursday, including changes to employment insurance, that total $37 billion in proposed spending.

Federal spending has rocketed through the course of the pandemic with the deficit to $343.2 billion and debt to $1.2 trillion — both record highs.

Goldy Hyder, president of the Business Council of Canada, asked Freeland in an open letter to “establish clear fiscal targets” to use for judging “incessant demands for new spending.”

Those demands could come from opposition parties in exchange for their support on confidence votes, from departments delivering programs or Freeland’s fellow Liberal MPs, leaving her to manage multiple and politically sensitive relationships.

Rebekah Young, director of fiscal and provincial economics at Scotiabank, said the deficit and debt levels will likely act as a constraint on any new spending plans Freeland crafts because they can also slow growth in the long run.

“If they come out with a whole lot more spending, I think that’s where they risk spooking markets a bit that they are not looking at the economic conditions, they are looking at more the political side of spending,” Young said.

Freeland on Thursday couldn’t say what would be in her first budget, noting she didn’t get an economic crystal ball at her swearing-in ceremony two days earlier. She also said the government would continue to do what was necessary to support Canadians.

One of the next steps is a promised a reshaping of the social safety net that will be detailed more in a throne speech late next month, and a budget to arrive shortly thereafter that workers and businesses at home as well as abroad will closely watch.

“Her success is critical for the country and that means that she needs to have absolute support from the prime minister and from members of cabinet,” Beatty said.

“They have to understand that the whole of the world is watching.”

Source:- Global News

Source link

Continue Reading

Economy

German economy to shrink by 5.2% this year, grow by 5.1% next year – Ifo – TheChronicleHerald.ca

Published

on


BERLIN (Reuters) – Germany’s Ifo institute on Tuesday said Europe’s largest economy would likely shrink by 5.2% this year, raising its previous estimate for a 6.7% drop, in the latest sign the damage caused by the COVID-19 pandemic could be smaller than initially feared.

“The decline in the second quarter and the recovery are currently developing more favourably than we had expected,” Ifo chief economist Timo Wollmershaeuser said.

For 2021, Ifo cut its economic forecast for Germany to 5.1% growth from its previous estimate of 6.4%. It expects the economy to expand by 1.7% in 2022.

The number of people out of work is seen rising to 2.7 million this year from 2.3 million in 2019, before edging down to 2.6 million in 2021 and then to 2.5 million in 2022.

That would translate into a jump in the unemployment rate to 5.9% this year from 5.0% last year. The rate would then drop to 5.7% percent in 2021 and 5.5% in 2022, Ifo said.

The Ifo institute cautioned that there was an unusually high degree of uncertainty attached to the forecasts. It pointed to the rising number of coronavirus infections, the risk of a disorderly Brexit and unresolved trade disputes.

(Reporting by Michael Nienaber; Editing by Michelle Adair)

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Coronavirus economy: The 'banker ladies' saving friends from debt – BBC News

Published

on


Minority communities in the US and elsewhere have sometimes turned to traditional money saving methods outside the formal banking system. The economic shock from the coronavirus pandemic could spur renewed interest in those savings clubs.

When Hilda Robles recalls her first years in America, tears come to her eyes.

“I cried and even wanted to leave at one point because I felt alone,” she says. “I would ask people for help and they couldn’t help me because they didn’t understand Spanish and I didn’t understand English.”

When she came to San Antonio, Texas some 20 years ago, even daily duties like getting to work or going to the doctor were feats of bilingual diplomacy and logistical planning – she had no car, no English and almost no one to turn to for help.

Opening a bank account seemed impossible. “When I stepped into a bank for the first time, I was told I couldn’t open a bank account because I had no social security number,” she says.

“Someone told me about a bank where I could open an account with no social security number, but the language barrier stopped me from going.”

So Ms Robles, 49, went a different route – she started a tanda, an informal savings club popular in Latin America, with contributions from her extended relatives.

Members of the club each contribute a fixed sum to a pool of money on a regular, periodic schedule, with the lump sum going to one member each round until everyone gets paid.

This means that members get back what they put in over the course of the scheme, but by getting it in the form of a lump sum, the money can be put to use for purchases, investments or debt payments they otherwise could not afford. Members who get their “hand” early are effectively receiving an interest-free loan, while those who receive theirs later in the cycle are essentially withdrawing a lump of “saved” cash.

With the $5,000 lump sum she received for her turn of her tanda, Ms Robles bought her first car. Her relatives and friends in the savings club were able to put down payments on houses, pay for university tuition – and now, amid the Covid-19 pandemic, survive when their families have been out of work or sick.

Since that first savings club 14 years ago, Ms Robles has run them continuously with only a few months break to organise the next one.

“It gives me a lot of joy to see people reach their goals because of the tandas without having to drown in debt from loans,” she says. “It’s proof that among us Hispanics, we can get ahead here.”

Hispanic-Americans are not alone in their use of this ancient savings mechanism that has parallels all over the globe, known generally as a rotating savings and credit association, or roscas.

In Mexico, they are popularly called tandas, but they are also known as huis, susus or ballot committees in various parts of the world. Immigrant communities continue their practice in the US.

As economic hardship accompanies the public health crisis caused by the Covid-19 pandemic, for some families, traditional methods of saving outside the banking system have become a lifeline, especially for hard-hit immigrant communities with little access to mainstream sources of capital.

Financial access and security in America has become an increasingly pressing subject of discussion in 2020. Even before the pandemic, the US was behind other rich countries when it comes to accessing money and credit.

Some seven percent of Americans over the age of 15 did not have any kind of bank accounts in the US in 2017, compared to less than one percent of Canadians, and less than four percent of Britons, according to the World Bank.

A quarter of American adults – more than 80 million people – were “unbanked” or “underbanked”, meaning either that they had no accounts entirely, or that they are forced to use alternative services besides traditional banks in order to get enough financial access to meet goals or obligations.

Households most likely to fall into the two categories were black or Hispanic, lack university qualifications and to be poor. To access loans, they must sometimes turn to non-bank lending options like payday lenders or loan sharks.

These shadow banking options can be risky, charge high interests and bring dire consequences for borrowers who struggle to pay – but a rosca can provide a safer, more trustworthy alternative.

“These systems are actually useful when we have bank systems that have a finite possibility,” says Caroline Hossein, a professor of business and social studies at York University who studies roscas in communities in Canada.

“Banks only have a certain amount of money, and if you only have a certain amount of money, you’re only going to dish it out to those that are less risky.

“So it makes perfect sense that people would engage in these kinds of mutual aid or money pooling systems.”

Often, they are run by women, whom Dr Hossein calls the “banker ladies” of the community.

“The banker lady, who might be the one organising it – you can be in touch with her anytime of day, it may be someone who lives in your neighbourhood so [there’s] the ease of getting there.

“The paperwork is not as treacherous as it would be as a formal bank, so there’s a kind of kinship that exists because it’s people who voluntarily like and know each other.”

Though they tend to be “more of a life line for people who have difficulty accessing banking, particularly on the lending side,” such savings schemes are also used by more established members of communities who may have inherited knowledge about them from immigrant parents.

Beyond access to a pool of money, “a primary benefit is building ‘bonds of mutual trust’ within a network of trustworthy people,” says Lee Martin of the University of California, Davis. Roscas are primarily beneficial for people without access to mainstream forms of credit, he says.

But because they are used by marginalised communities, studying their overall prevalence and use has been difficult, says Dr Hossein, who participates in a rosca – known as a su-su in her Afro-Carribean community – as part of her research.

“A lot of these roscas, particularly in places like Canada, the US or Europe, tend to be underground,” she says, because many worry that the endeavour is seen as an unrespectable or even an illicit form of financing, only for those who are short of options. Clearly, unlike a savings account, they do not generate interest.

Yet economists believe they are probably quite common in the West. One survey of Korean-American garment business owners in Los Angeles from 2004 found that 77% of households had participated in a version of the lending scheme.

Self-lending within communities can have unexpected benefits. A rosca-like system among Chinese immigrants in Spain, for example, helped expatriate businessmen weather the Euro crisis of the late 2000s and 2010s.

The Chinese business community was “largely insulated from the vagaries of the country’s tottering retail banking system” – precisely because the system that shut them out meant they turned to each other, reported the Financial Times in 2014.

In the 2020 Covid-19 crisis, families who participated in the tanda Ms Robles is running were able to pay their bills when some fell ill and could not work.

For most, it was their only source of cash, Ms Robles says – only one of the families has received a cheque from the government for coronavirus relief because they lack the papers to get onto the dole.

Like any investment scheme, however, roscas are not risk-free. A participant could fail to pay their hand, or take their share and run.

Ms Robles says there have been rare times that she misplaced a contribution and had to make up the difference out of her own pocket, which can be costly.

As they operate on trust, usually within a deeply connected community, the social consequences of misdeeds dissuades wrong-doing.

But since they are run by privately, there is little legal recourse for cheating. And unlike putting money in a bank savings account, there is no interest paid.

Could roscas catch on and become more mainstream? The Federal Reserve Bank of Philadelphia asked just such a question in 2006, but was sceptical given the depth of trust it would require.

An attempt by Yahoo Finance to popularise a tanda app in 2018 was unsuccessful. The scheme shut down after only a few months due to, it would seem, lack of participation.

There are two big hurdles, as Dr Hossein sees it – the stigma attached to a non-traditional financial tool used by ethnic minority communities, and the barrier in trust that must be surmounted to put one’s faith in other people to handle money.

But with the Covid-19 pandemic, a younger generation of North Americans with an interest in sharing resources and the technology to do so efficiently – from crowdfunding to forms of “caremongering” – roscas are bound to be a savings method that continue and evolve and expand.

For Mayra Martinez, 30, a university administration professional in Dallas, Texas, being in tandas has helped her learn about trust and foster a sense of obligation to save, which can otherwise be hard for young people like herself she says.

“It’s not like your commitment to yourself, where you can easily say ‘hmm, I’m not going to do that this month because I just don’t want to,” she says.

It is an added layer of security in an economic world that has been particularly unpredictable for young professionals, which Ms Martinez says she has seen first-hand – her sister and brother-in-law each recently tested positive for Covid-19 and could not work.

“She just happened to get her tanda this week,” says Ms Martinez. Because of that, Ms Martinez says, her sister was able to tell her husband: “It’s ok”.

The tanda Ms Martinez is involved in now consists of family members from all generations and is run by her mother.

Would she ever take over and start one for her own cohort of siblings and cousins once the older generations retire from such schemes?

“I wouldn’t mind running one,” she says, adding with a laugh, “but it depends on which cousins.”

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Trudeau Poised to Announce Three-Pillar Economic Recovery Plan – Yahoo Canada Finance

Published

on


Trudeau Poised to Announce Three-Pillar Economic Recovery Plan

(Bloomberg) — Prime Minister Justin Trudeau is set to unveil a new plan to try to contain the spread of Covid-19 and recharge Canada’s pandemic-battered economy, according to a senior government official.

The broad themes in this week’s so-called Throne Speech — which outlines his government’s priorities — will be a focus on the immediate task of tackling the coronavirus, a medium-term commitment to support Canadians through the pandemic and a “resiliency agenda” to spur recovery and reconstruction.

Trudeau’s agenda won’t establish budget targets, which will be left for Finance Minister Chrystia Freeland to detail later this year in a fiscal update, the official said, speaking on condition they not be identified because the document isn’t yet public.

Wednesday’s speech is one of the most anticipated in Trudeau’s five years in power, with questions mounting over how his governing Liberals plan to navigate their next policy steps amid surging Covid-19 case numbers and soaring budget deficits.

The prime minister needs to balance the need for more health-care spending with pledges to engineer an ambitious and green post-pandemic agenda. And he needs to do it without further eroding the nation’s financial credibility after one major credit-rating agency downgraded Canada’s debt.

“This government has set certain expectations and now the pressure is on them to meet their own expectations,” pollster Shachi Kurl, executive director of the Angus Reid Institute, said by phone.

Parliamentary Reset

Health care spending will be the first pillar for the economic recovery, the official said. This includes spending for vaccines, Covid-19 testing and support to localize outbreaks to maintain control over a resurgence of cases.

The second will be a pledge to provide financial support to Canadians who are struggling economically due to the pandemic, with a focus on shifting people back into the workforce.

Economic recovery and reconstruction efforts are the third pillar. This will include a pledge to help foster green investments, resolve major health issues such as long-term care for seniors and bolster support systems for the most vulnerable, like low-income women and minorities.

Trudeau has spoken publicly about plans to overhaul the employment insurance system, provide support for childcare and long-term care and build a cleaner economy through climate initiatives like retrofitting buildings and electric vehicles.

The prime minister suspended all parliamentary business last month after a public rift with his previous finance chief prompted Freeland’s appointment, claiming he needed a new legislative slate in order to move ahead with a “bold” new spending plan to help drive the recovery.

Canada has already budgeted C$380 billion ($289 billion) in new debt this year as a response to the downturn, spending that will likely drive the federal government’s debt to about 50% of economic output, from 31% last year. That’s triggered a backlash from business groups and economists, who are calling on Trudeau to commit to specific new debt targets to impose discipline on the budgeting process.

To assuage those concerns, Freeland vowed last week to preserve Canada’s reputation for sound fiscal management as her government considers the next steps to drive the recovery.

Trudeau is prepared to spend whatever it takes to combat the immediate impacts of Covid-19, given the emergency expenditures will only be temporary, the official said. Any future spending deemed structural, however, would be within new “fiscal tracks” that will be laid out by the finance minister later this year.

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="For more articles like this, please visit us at bloomberg.com” data-reactid=”34″>For more articles like this, please visit us at bloomberg.com

<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)–sm Mt(0.8em)–sm" type="text" content="Subscribe now to stay ahead with the most trusted business news source.” data-reactid=”35″>Subscribe now to stay ahead with the most trusted business news source.

©2020 Bloomberg L.P.

Let’s block ads! (Why?)



Source link

Continue Reading

Trending