By Richa Rebello and Manjul Paul
BENGALURU (Reuters) – The euro zone economy will contract again this quarter as renewed lockdown measures stifle activity, according to a Reuters poll which showed the bloc’s GDP would then return to pre-crisis levels within two years.
Hopes for a coronavirus vaccine and additional support from the European Central Bank this month meant quarterly growth forecasts for next year were upgraded in the poll conducted from Nov. 26-Dec. 2.
“We now assume vaccines will be rolled out in the euro zone next year and most restrictions on economic activity are lifted during Q2. As a result, GDP increases by around 5% next year, regaining its pre-COVID level in early 2022,” said Andrew Kenningham, chief Europe economist at Capital Economics.
“There are still big risks to this forecast. There could yet be a third wave of the virus, vaccine distribution could run into political or logistical problems, and governments could be slower to ease restrictions. On the other hand, the vaccines could be more effective or easier to roll out than anticipated”.
Nearly 80% of respondents, or 36 of 45, who replied to an extra question said the economy would return to pre-crisis levels within two years.
That was a major turnaround in expectations from August when more than 70% of economists said it would take two or more years to reach that level.
The wider poll showed after contracting 2.6% this quarter, the economy would grow 1.1% in the first quarter of 2021 compared with 0.8% in the last poll. It was then predicted to expand 2.0% and 1.8% in Q2 and Q3, better than median predictions of 1.8%, 1.2% in November.
On an annual basis, the economy was expected to shrink 7.4% this year, and grow 5.0% in 2021 largely unchanged from the last poll. For 2022, the growth forecast was upgraded to 3.5% from 3.1%. (Graphic: Reuters Poll: Euro zone economy and ECB monetary policy outlook, https://fingfx.thomsonreuters.com/gfx/polling/xlbvgzaxjpq/Reuters%20Poll%20-%20ECB%20and%20EZ%20outlook%20-%20December%202020.PNG)
That pick-up in growth will not filter through to inflation which was expected to remain far below the European Central Bank’s target of just below 2%, averaging 0.3% in 2020. 0.9% in 2021 and 1.3% in 2022.
Having remained in negative territory for the fourth straight month in November, inflation is likely to be a point of focus when the ECB’s Governing Council meets next week.
The ECB has launched a strategic review after years of inflation undershooting its target and nearly 80% of respondents to an extra question, or 33 of 43 economists, said the ECB would change its inflation target.
While a smaller section of poll participants commented on what the target would be, most said the ECB would allow more leeway around 2% or adopt an average inflation targeting framework, similar to the Federal Reserve’s recent policy.
“We are probably going to see something which looks a little bit similar to the Fed in the sense that this will be more of a symmetrical target. By changing to a symmetrical target, you build in a little more tolerance for higher inflation in the future,” said Elwin de Groot, head of macro strategy at Rabobank.
“This cements the idea rates will stay very low in the coming years… but the past ten years suggest these very relaxed policy settings are not sufficient to really create more growth and inflation. What you really need is a combination of monetary and fiscal policy.”
The ECB was expected to top up its pandemic-related bond purchases by 500 billion euros, at its Dec. 10 meeting, extending the programme by six months until December 2021, a Nov. 18 poll found. It was also predicted to change the terms of its targeted long-term loans to financial institutions.
(Reporting by Richa Rebello and Manjul Paul; Polling by Tushar Goenka and Hari Kishan; Editing by Jonathan Cable and Toby Chopra)
Israel economy likely to grow 4.6% in 2021, says finance ministry – The Journal Pioneer
By Steven Scheer
JERUSALEM (Reuters) – Israel’s economy is likely to grow by 4.6% this year, the Finance Ministry said on Sunday in a forecast reliant on continuation of rapid COVID-19 inoculations and a drop in the infection rate.
In a lower probability scenario in which the health environment deteriorates because of new virus mutations or vaccinations taking longer than expected, forcing further lockdowns, the economy would grow by only 1.9%, the ministry said, adding that its projection for 2020 is a 3.3% contraction.
Israel has been a world leader in vaccinating its population against the coronavirus.
“The economy will recover at the rate that had characterized the sub-prime (2008 financial) crisis,” the ministry said of its main scenario, assuming “vaccination of the population in the first half of 2021 when, in this period, there are still limited health restrictions”.
The Bank of Israel has estimated a contraction of 3.7% for 2020 and growth of 6.3% in 2021 if the rapid vaccination pace is maintained. That would fall to 3.5% growth in a slow-inoculation scenario.
According to the ministry, Israel’s economy fared relatively well in 2020 and outperformed an OECD average of a 5.5% contraction. It cited minor damage to exports thanks to high-tech exports.
It noted, however, that unemployment remained high at 15.4% in 2020 and is expected to fall to 8.6% in 2021 in its base scenario and to 11.6% in a more pessimistic projection, with a decline in the average wage in either case.
Separately, in a third estimate, the Central Bureau of Statistics said the economy surged 39.7% in the third quarter of 2020 on an annual basis compared with the second quarter, reflecting an economy that was mostly open during the summer between lockdowns. The economy had contracted by 29.9% in the second quarter.
Another slight contraction is expected in the fourth quarter owing to lockdowns, while exporters have said they are also suffering because of an appreciation of the shekel. The currency last week reached 3.11 against the dollar, its strongest in 24 years.
The Bank of Israel, which has been reluctant to lower short-term interest rates beyond its current 0.1% rate on a view that rapid vaccinations will boost the economy, responded on Thursday with a pledge to buy $30 billion of foreign currency in 2021, up from $21 billion in 2020.
The shekel has since weakened to 3.27 against the dollar.
Growth in the July-September period was driven by sharp gains in exports (59.7%), private spending (42.3%) and investment in fixed assets (17.2%).
(Reporting by Steven Scheer; Editing by David Goodman)
Economy Spiraling With Urgent Need for Action, Biden Aide Warns – Bloomberg
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- Economy Spiraling With Urgent Need for Action, Biden Aide Warns Bloomberg
- Biden’s aid plan aims to increase minimum wage, revamp economy CTV News
- Biden plan to pump $1.9 trillion into pandemic-hit economy: report TheChronicleHerald.ca
- Biden unveils $1.9T plan to stem COVID-19 and steady economy The Tri-City News
- Biden to push $1.9tn stimulus for pandemic-battered US economy Financial Times
- View Full coverage on Google News
Nearly half of adult Canadians struggle with literacy — and that's bad for the economy – CBC.ca
Nearly half of Canada’s population has a big roadblock ahead of them when it comes to post-pandemic economic recovery — and it’s not the novel coronavirus but a fundamental set of skills for daily life.
Poor reading, writing and numeracy skills in adults make up a literacy gap in Canada with consequences for both democracy and the economy. Experts say the gap is due in part to an abundance of jobs in the past that do not require the daily use of reading comprehension and information synthesis skills.
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In short, literacy is not like riding a bike. While Canadians tend to leave the high school level with these skills, it takes practice to retain them and Canada’s economy does not provide the opportunity to do that for many workers.
Despite relatively high education rates, an analysis of international assessments by Statistics Canada in 2013 showed that more than one in six adult Canadians fell short of passing the most basic set of literacy tests.
The Programme for the International Assessment of Adult Competencies (PIACC) looks at how adults process information and how they use literacy, mathematics and problem solving both at home and at work.
If you’re working in a particular role, whatever it is, where reading and writing isn’t necessarily a big part of the job, those skills may erode over time.– Michael Burt, Conference Board of Canada
Canada’s results, which have not substantially changed since the first PIACC, show that many in this country are unable to complete ordinary tasks, such as filling out a job application, reading a news article or sending an email.
About half the adult population fell short of passing a high school level of assessment, by testing the ability to digest lengthier and more complex texts while processing the information accurately.
“Generally speaking, we’re below average compared to other OECD [Organization for Economic Co-operation and Development] countries in terms of adult literacy, numeracy skills,” said Michael Burt, an economist with the Conference Board of Canada.
The not-for-profit research organization gave Canada a “C” grade in adult literacy back in 2014.
“I think it really boils down to [Canadians] have a competitiveness challenge,” he told CBC Radio’s Cost of Living. “We cannot stand still because our competitors certainly are not.”
Countries that score higher than Canada in the international skills assessment, which Statistics Canada participates in, include Japan, Australia, Sweden, Finland and Holland.
The literacy gap is not limited to immigrants
Unsurprisingly, new Canadians with a native language other than English or French appear in the lowest literacy category at a higher rate than their Canadian-born counterparts.
In some provinces, immigrants with a very high literacy score actually represented a higher proportion than the Canadian-born population. Statistics Canada’s analysis of the PIAAC data indicated that more “established immigrants,” who had been in Canada longer, were represented in the lowest literacy groups at roughly the same proportion as those born in the country.
However, the lowest-scoring groups also include a significant number of Indigenous people in Canada, as well as English and French speakers born in this country.
It’s important to separate out those born in Canada from those born abroad, because while some immigrants may struggle with a new language, a significant number also have extensive job experience and education and are highly skilled in their original languages.
Those born and raised in Canada who struggle with language, math and computer proficiency, on the other hand, are less visible because, as advocates put it, they’re very good at “faking it.”
“They tend to hide this fact from everyone because of the fear of being called names,” said Monica Das, executive director of Project Adult Literacy Society (PALS) in Edmonton.
“‘Dumb, stupid, crazy, handicapped’ and other words are used to describe you as soon as you identify yourself as someone who struggles with reading and writing.”
Deep ‘shame’ felt by native English speakers
Native English speakers make up about half of the clients who turn to PALS for help, Das said.
Eddy Piché, 59, is one of them.
The Edmontonian spent nearly 30 years driving trucks all over Ontario and Alberta before coming to terms with what he called his “shame.”
“Some people, like, come out of college, university, they use big words and all that stuff,” Piché said. “They make you feel you really can’t do this, can’t do that. You feel shame.”
As a child, Piché said, it always took him 10 extra minutes to learn everything. He describes those extra minutes, every time, as enough to set him back for life.
“In the old days, like in the 1970s, if you had a hard time learning and stuff, like, they put you back. They put you in special ed classes,” he recalled.
Piché said because he was in special education, no one ever bothered to teach him how to read and write.
As a truck driver, he excelled by memorizing landmarks instead of reading road signs.
At the age of 48, Piché decided to go back to school to become a social worker after overcoming significant setbacks in his life — including mental illness and addiction.
At first, he relied on his wife to help write his papers. Eventually Piché enrolled in Edmonton’s PALS program and met with a volunteer tutor each week to work on his reading comprehension and writing skills.
Today, he works with homeless and other marginalized populations.
“Some people never gave up on me, so I do the same thing. I don’t give up,” Piché told The Cost of Living. “My motto is never leave anybody behind. That’s why I do social work.”
Skills needed in a changing, automated economy
Eddy Piché’s ability to retrain and pivot is a success story, but on its own it does not scale up to solve Canada’s problem with literacy.
For years, Canada had an abundance of high-paying jobs that didn’t require high levels of literacy, such as natural resource-based work, said the Conference Board of Canada’s Burt.
“Because of the nature of our economy, things like mining and forestry are more prominent in our economy than some of our OECD peers,” he explained in a comparison to countries such as Japan or Sweden.
Due to these economic factors, even if the Canadian education system is producing graduates with high enough literacy scores, these skills sets can atrophy.
“If you’re working in a particular role, whatever it is, where reading and writing isn’t necessarily a big part of the job, those skills may erode over time,” Burt said.
Financial incentives also distort whether Canadians complete their education, which would impact the level of their literacy skills as they enter the workforce to try for higher wages.
At the height of the oil boom, Alberta had a higher high school dropout rate than several other provinces. But the portion of the population with less education now has fewer places to go as changes to the economy accelerate, Burt said.
“The oil and gas sector is not the growth driver for the economy as it was five years ago,” the economist said. “The dynamics around that have changed considerably in recent years. On top of that, we’re looking at the impacts of digital technologies and automation on the workforce.”
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As many as one in five jobs in Canada are at risk of being automated, according to the Conference Board of Canada.
Some Canadians filling those “high-risk, low-mobility” jobs most susceptible to automation would have difficulty shifting to work that requires literacy; they tend to come from some of the country’s largest industries, such as manufacturing, food services, accommodation, retail and construction.
“These are people whose jobs are at risk to automation, and they have limited ability to move over to other jobs that are at lower risk,” Burt explained.
“Basically, there’s a real need to to think about how skills requirements are changing in the workforce,” he said. “How do we adequately prepare people for entering the workforce and how do we ensure that there are good transition pathways available for people already in the workforce today?”
Low literacy affects making informed democratic decisions
Another challenge that comes with low literacy is the difficulty in understanding information needed to make informed decisions, both in daily life and at the ballot box.
Forty-nine per cent of the Canadian population does not hit a level of literacy that can “disregard irrelevant or inappropriate content” to accurately answer questions about something they have read.
The impact of this has, perhaps, become more clear with the rise of online disinformation. On the internet, there’s no shortage of bad information to push people into making badly informed decisions. Researchers say those who struggle with reading and writing tend to also perform poorly on the digital front.
Samantha Bradshaw, a a postdoctoral fellow at the Digital Civil Society Lab at Stanford University in California, studies the impact of social media misinformation and told Cost of Living that tackling digital literacy is just as important as traditional books on paper.
“Consuming content digitally is increasingly more a part of our media diet and how we get information about politics,” Bradshaw said, adding that big tech companies such as Facebook and Twitter are likely to face more government scrutiny from regulators.
According to Bradshaw, it’s critical for anyone making decisions affecting today’s democratic institutions to understand both how the information they get online is delivered to them and the biases that are present.
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“So being able to understand both the mechanisms through which information is delivered to us through these online systems, the biases that exist within the technology, as well as having the literacy skills to communicate, to interpret, to understand the argumentation and the ways in which content and narrations are being told through an online digital media,” she said.
A lot of untapped potential
There’s no magic solution to narrowing Canada’s literacy gap.
Education and training play a role, but workers and employers also need to put a higher premium on soft skills, such as reading comprehension and communication, Burt said.
“I think part of it is understanding what skills make people more resilient,” he said.
The good news is those with low literacy skills — who are most at risk of losing their jobs — have a lot of untapped potential, according to those working in the sector.
Eddy Piché serves as an example.
His skill set in problem-solving was a great fit for social work, even before he returned to school to upgrade his credentials.
But because he was unable to fill out a job application, write a caseload report or respond to emails, his options to capitalize on those soft skills to gain employment were severely limited.
“People forget to realize that this adult has been able to support himself all this time without someone else knowing that he can’t read or write,” said Monica Das with PALS in Edmonton.
“You should appreciate the amount of skills that this person has.”
Written and produced by Falice Chin.
Click “listen” at the top of the page to hear this segment, or download the Cost of Living podcast.
The Cost of Living airs every week on CBC Radio One, Sundays at 12:00 p.m. (12:30 NT).
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