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COVID-19 was 'expensive,' but Freeland says economy is improving in fiscal update – National Post

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The Liberal government is forecasting to end the current fiscal year $144.5 billion in the red

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OTTAWA – Finance Minister Chrystia Freeland offered few new economic measures in the Liberals’ fiscal update Tuesday, portraying the Canadian economy instead as well on the way to a post-pandemic recovery.

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Freeland delivered her speech in Parliament on Tuesday amid growing concerns about the Omicron variant of COVID-19, which appears to be spreading across the country. She said the government was budgeting $1.7 billion to buy more rapid tests and ship them out across the country to provinces.

Freeland said that funding will buy 180 million tests and provinces should use the ones they have in storage now.

“There is not a shortage of rapid tests today in Canada, and we have a lot more coming. I really urge Canadians, use rapid tests, use boosters, wear your masks.”

Freeland herself used rapid tests on Tuesday after two of her staff tested positive for COVID-19. She said she has since tested negative, but as a precaution gave the fiscal update virtually rather than appearing in person in Parliament.

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The government has also put aside $4.5 billion as a sort of contingency fund for Omicron related expenses, on top of money already set aside for wage and rent help for hard-hit industries. They have also budgeted $5 billion to help repair damage from the B.C. floods.

Freeland said the government’s plan during the pandemic was to ensure the economy came back as strong as possible.

“Keeping the Canadian economy on life support as we went into COVID-19 hibernation was expensive. But we knew that keeping Canadian families and businesses solvent would help our economy rebound,” she said.

According to the fiscal update, the government ended the last fiscal year, which ended in March, with a $327 billion deficit, down from the $354 billion it was projecting. It also is forecasting to end the current fiscal year $144.5 billion in the red, down roughly $10 billion from the $154.7 billion projected last year.

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Freeland touted job figures and GDP growth, which have trended positively in the last few months. She said the government wanted to ensure that Canada moved swiftly past the damage done by the pandemic, unlike what happened after the 2008 recession.

“We have already more than recovered lost jobs, a healing which took eight months longer after the much milder 2008 recession. And we are on track to recover lost GDP five months more quickly than after the 2008 contraction,” she said.

While the country has regained jobs and GDP growth, inflation has also soared in recent months, rising in October higher than it has been in nearly two decades. Freeland said the government is monitoring the impact, but believes inflation to be primarily a global phenomenon.

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“We know inflation is a global phenomenon driven by the unprecedented challenge of re-opening the world’s economy,” she said. “Turning the world economy back on is a good deal more complicated than turning it off.”

Conservative leader Erin O’Toole was quick to condemn the Liberals’ update as doing nothing for the inflation Canadians are seeing at grocery stores.

“Instead of delivering a plan to combat the cost of living crisis and secure our country’s recovery, the Liberal government is making life more expensive for Canadians,” he said. “Canadians cannot afford for life to get even more expensive – yet that’s exactly what the Liberals’ ideological agenda is doing.”

Freeland defended her party’s economic record pointing out the jobs lost in the pandemic have returned and said even with rising prices, Canadians are better off if they are working.

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“The single most important thing when it comes to the well being of most Canadians is having a job.”

O’Toole said the Liberal plan lacked vision and risked allowing Canada to fall behind its international peers.

“We can get back to building prosperity and great jobs for Canadians, but the Liberal government, as we heard today, has no plans to make that a reality.”

The Conservatives haven’t specifically ruled out supporting the government’s bill for pandemic benefits, but they have also not had many of their demands met.

The Liberals have offered some of what the NDP and the Bloc Québécois were seeking, including a fix for low-income seniors who received CERB payments and now face clawbacks to their Guaranteed Income Supplement.

The update puts aside $742.4 million for low-income seniors who may have taken both benefits and now face clawbacks.

The Bloc was also looking for support for cultural workers in Quebec who have not yet been able to return to regular gigs and performances and the government is putting $60 million aside for that.

• Email: rtumilty@postmedia.com | Twitter:

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Afghan women losing jobs fast as economy shrinks and rights curtailed – The Globe and Mail

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In a small tailoring workshop in Kabul, 29-year-old Afghan entrepreneur Sohaila Noori looks on as her dramatically reduced work force of around 30 women sew scarves, dresses and baby clothes.

A few months ago, before the hard line Islamist Taliban movement seized power in August, she employed more than 80 people, mostly women, across three different textile workshops.

“In the past, we had so much work to do,” said Noori, who was determined to keep her business running in order to employ as many women as she could.

“We had different types of contracts, we could easily pay a salary to our master tailors and other workers, but currently we have no contracts.”

With Afghanistan’s economy deep in crisis – billions of dollars in aid and reserves have been cut off and ordinary people have little money even for basics – enterprises like Noori’s are struggling to stay afloat.

Making matters worse, the Taliban will only allow women to work subject to their interpretation of Islamic law, prompting some to leave jobs out of fear of punishment by a group that severely restricted their freedom the last time it ruled.

Hard-won gains in women’s rights over the last two decades have been quickly reversed, and reports from international rights experts and labour organizations this week painted a bleak picture for female employment and access to public space.

Though the economic crisis is hitting the entire country – some agencies predict it will leave almost the entire population in poverty in the coming months – the effect is disproportionately felt by women.

“The crisis in Afghanistan has made an already challenging situation for women workers even worse,” said Ramin Behzad, Senior Coordinator of the International Labour Organization (ILO) for Afghanistan.

“Work in key sectors has dried up while newly imposed restrictions on women’s participation in some economic areas are also hitting home.”

Afghan women’s employment levels fell by an estimated 16 per cent in the third quarter of 2021, according to an ILO report released on Wednesday, relative to 6 per cent for men.

Women’s employment was expected to be 21 per cent lower than it was before the Taliban takeover by mid-2022 if current conditions continued, according to the ILO.

For the workers at Noori’s workshop, the opportunity to make some money outweighed other worries.

“Mostly our families are worried about our safety. They repeatedly call us when we don’t reach home on time, but we all continue to work … because we have economic problems,” said Lailuma, who only gave one name out of fear for her safety.

Another worker, Saleha, now provides for her entire family.

“My monthly income is around 1,000 Afghanis [$10], and I’m the only person working in my family … Unfortunately, since the Taliban have come to power, there is [nearly] no income at all.”

Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.

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Venezuela Holds Rare Call With Bondholders as Economy Recovers – BNN

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(Bloomberg) — Venezuela’s government is making a fresh attempt to open channels with international investors, presenting potential deals in the oil and tourism sectors and talking up new economic growth data. 

Advisers, led by top economic aide Patricio Rivera, held an hour-long call on Wednesday with at least two dozen bondholders and fund managers from the U.S. and Europe, according to four people with direct knowledge of the conversation. The call was organized by the Venezuela Spain Chamber of Industry and Commerce. 

Rivera, a former Ecuadorian Finance minister who is spearheading reforms aimed at liberalizing Venezuela’s economy, briefed the investors on policy shifts and the government’s commitment to become more market friendly, the people said. He also said the government was open for investments in several sectors, from oil and minerals to tourism, the people said.  

Rivera did not respond to a request for comment. 

Venezuela has had limited contact with debt holders since it defaulted on bonds in 2017. It owes at least $60 billion plus interest on those defaulted notes. The call comes as the country breaks a seven-year recession, posting economic growth of  7.6% in the third quarter of 2021, according to preliminary data, and as it exits a four-year bout of hyperinflation. 

Despite the new outreach, Venezuela remains under U.S. economic sanctions that pose an important roadblock to American bondholders. 

©2022 Bloomberg L.P.

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Xi resets policy priorities to boost economy – The Tribune India

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Yogesh Gupta

Former Ambassador

China’s Central Economic Work Conference (CEWC), held at Beijing from December 8 to 10, 2021, decided that all stakeholders should work actively to maintain stability in the macro-economy in view of new challenges as the country holds the Winter Olympics from February 4 to 20, 2022, and the 20th Congress of the Communist Party of China (CPC) later this year. What made the economic planners to rethink the policy direction was the sharp dip in China’s GDP growth rate from 18.3% in Quarter 1 of 2021 to 7.9% in Q2, 4.9% in Q3 and 4% in Q4.

Structural changes ordered by President Xi Jinping such as reducing loans to the real estate sector, lower emission targets resulting in power cuts and the zero tolerance to Covid-19 had played an important role in decelerating the economic growth. Xi is personally involved in directing the real estate policies as he considers the unchecked growth of this sector as posing a threat to China’s economic stability.

New measures undertaken by the Xi regime included severe restrictions on giving bank loans, allow hugely indebted developers to default to rein in large unproductive expenditure and announcement of a property tax on a trial basis in certain provinces to discourage the purchase of multiple properties to curb speculation. Given that the real estate sector accounts for 29% of the Chinese economy, these measures, according to some economists, may reduce China’s GDP growth by about 0.5% in 2022 and thereafter. These restrictions have strained the local government’s finances, as selling land is an important source of revenue. Several local governments slashed the salaries of their staff, weakening the consumption.

In the last two years, China has undertaken several measures to reduce its greenhouse emissions, including controlling of its coal-fired power plants to meet its targets of peaking carbon dioxide emissions by 2030, lower the carbon dioxide emissions per unit of GDP by over 65% (from 2005 level) by 2030, increase the share of non-fossil fuels and forest stock. Decrease in power generation by coal-fired plants and rationing since September 2021 disrupted industrial production in many provinces as several industries were forced to cut production and reduce jobs. Recurrent outbreaks of Covid in some areas and China’s zero tolerance approach again forced several businesses to close and confined about 20 million people at home. The working of several companies in technology, education and gaming sectors was adversely impacted due to the regulatory actions, resulting in lower earnings and loss of jobs.

At the CEWC, it was felt that new external challenges had arisen as President Biden had not only continued the policies of his predecessor but also taken a harder line with his allies towards China. The Comprehensive Investment Agreement with the EU had remained frozen and China’s relations with Australia and Japan had deteriorated. These countries had become more vociferous in criticism of China’s human rights record and applied a number of sanctions against the Chinese companies and individuals for investments and exports. Several Chinese leaders appeared nervous about the slowing of economic growth in 2022 as Xi is expected to seek an unprecedented third term as President. They advised him that priority should shift to maintaining growth and stability so that the Chinese economy could convey a picture of strength.

Amid deterioration in China’s external environment, the conference identified securing supplies of primary products such as food, soybean, minerals and energy as a priority to prepare for the post-Covid world. “The Chinese people’s rice bowl must be firmly held in their own hands at all times,” Xi emphasised. He underlined the need to establish a strategic materials reserve to secure minimum needs at critical moments and work on a comprehensive conservation strategy. Other four priorities agreed were “common prosperity, capital regulation, defusing major financial risks and carbon neutrality. Concerns were expressed at the high level of unemployment among the migrants, the youth and possible outflow of foreign exchange as the US dollar strengthened following rise in the interest rates.

In view of these reasons, it was agreed that the government would have to give bigger policy support to the economy. China’s central bank had also conveyed dovish signals, cutting the reserve requirement ratio to the banks in a departure from central banks in the developed countries. Though the policymakers remained committed to structural reforms, it was agreed to slow down the regulatory crackdown and provide targeted support to SMEs, first time homebuyers, more funding for technology innovation and green investments.

China’s foreign trade made impressive gains in 2021, reaching $6.05 trillion as it functioned as a supply house to the rest of the Covid-stricken world. Trade with the US soared by 28.7% ($755.6 billion) and India by 43.3% (total $125.66 billion, Indian exports $28.14 billion, imports $97.52 billion). The increased global demand was chiefly responsible for 8.1% growth of China’s economy in 2021.

Chinese leaders are worried that external demand may not sustain as other major economies come out of Covid and start exporting this year. Consumption in China has not moved beyond 55% of the GDP (54.3% in 2020) in recent years due to the saving habits of the Chinese people for expenditure on health, education and old age. The government is, therefore, forced time and again to resort to big investments to drive up the growth rates.

It is now trying to increase investments in research and innovation (its R&D expenditure reached 2.4% of GDP in 2020), adoption of intelligent technologies and digital economy. While these technologies will yield efficiencies and mitigate to some extent the adverse impact of declining workforce, these will not lessen the latter’s adverse impact on lowering consumption. China will, therefore, be forced to accept sub-5% economic growth in the coming years as it rebalances its economy away from non-productive expenditures and starts experiencing the negative effects of population decline.

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