Economy

Europe's stagnant economy is vulnerable to a shock from China – CNN

Published

5 years ago

February 15, 2020

The German economy did not grow in the final three months of last year, setting up the country for a difficult 2020 just when it was meant to begin experiencing a revival.

Weakness in the world’s fourth largest economy reverberated across the eurozone, where growth slumped to a seven-year low of 0.1% in final quarter of last year.

That makes Europe especially vulnerable to the looming hit from the coronavirus outbreak. More than 64,000 people globally have been infected, and China’s economy is still struggling to get moving again after the extended Lunar New Year holiday.

“The [eurozone] economy should be about to turn a corner, but the coronavirus now means that [the first quarter] could well be a write-off,” Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, said in a research note.

Germany was already in a feeble condition, logging growth of just 0.6% for the whole of 2019 amid weak global auto sales, the US-China trade war and uncertainty over Brexit.

Economists thought that the economy, which has been held back by its manufacturing sector, would start to pick up early this year. Then came the outbreak of the novel coronavirus.

China is the third biggest destination for German goods exports, and a drop in demand there is expected to further damage the country’s factories. In 2018, the country exported goods worth nearly €94 billion ($101.6 billion) to China, more than four times as much as France.

German carmakers, which do big business in China, are exposed: Major automakers sold fewer than 2 million cars in China last month, an 18% plunge from a year earlier.

“The impact from the coronavirus on the Chinese economy is likely to delay any rebound in the manufacturing sector as it at least temporarily disrupts supply chains,” Carsten Brzeski, chief German economist at ING, wrote Friday.

That’s drummed up talk about a potential recession in Germany, or two consecutive quarters of negative growth. Deutsche Bank, in a note to clients earlier this week, called a recession in the first half of the year “quite probable.”

Andrew Kenningham, chief Europe economist at Capital Economics, said he thinks Germany’s economy will remain at a standstill in the first half of 2020, which means a recession is “absolutely on the cards.”

“If you’re forecasting zero [growth], then it’s definitely fair to be talking about a potential recession,” he said.

That doesn’t bode well for the rest of Europe.

Kenningham predicts that economic growth in the eurozone will come in at 0.1% in the first quarter and 0.2% between April and June. Without momentum at the start of the year, he expects annual growth this year to be weaker than in 2019, when it was 1.2%.

The full impact of the coronavirus on the global economy remains unclear, with little clarity about when the pace of infections will level off and begin to decline. In the meantime, workers in the world’s second largest economy have had a hard time getting back to work, even as some bigger companies try to reopen their doors.

“Looking forward, the coronavirus provides a substantial risk for the expected global recovery, as hopes were pinned on an improvement of the Chinese economy,” Deutsche Bank said in its note.

Should the situation continue to deteriorate, the European Central Bank may need to step in, pushing interest rates further into negative territory or increasing monthly bond purchases.

President Christine Lagarde had started to review these unconventional policies, and the expectation had been for the central bank to keep policy on hold in the meantime.

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Economy

Minimum wage to hire higher-paid temporary foreign workers set to increase

Published

3 days ago

October 21, 2024

Anne Joseph

OTTAWA – The federal government is expected to boost the minimum hourly wage that must be paid to temporary foreign workers in the high-wage stream as a way to encourage employers to hire more Canadian staff.

Under the current program’s high-wage labour market impact assessment (LMIA) stream, an employer must pay at least the median income in their province to qualify for a permit. A government official, who The Canadian Press is not naming because they are not authorized to speak publicly about the change, said Employment Minister Randy Boissonnault will announce Tuesday that the threshold will increase to 20 per cent above the provincial median hourly wage.

The change is scheduled to come into force on Nov. 8.

As with previous changes to the Temporary Foreign Worker program, the government’s goal is to encourage employers to hire more Canadian workers. The Liberal government has faced criticism for increasing the number of temporary residents allowed into Canada, which many have linked to housing shortages and a higher cost of living.

The program has also come under fire for allegations of mistreatment of workers.

A LMIA is required for an employer to hire a temporary foreign worker, and is used to demonstrate there aren’t enough Canadian workers to fill the positions they are filling.

In Ontario, the median hourly wage is $28.39 for the high-wage bracket, so once the change takes effect an employer will need to pay at least $34.07 per hour.

The government official estimates this change will affect up to 34,000 workers under the LMIA high-wage stream. Existing work permits will not be affected, but the official said the planned change will affect their renewals.

According to public data from Immigration, Refugees and Citizenship Canada, 183,820 temporary foreign worker permits became effective in 2023. That was up from 98,025 in 2019 — an 88 per cent increase.

The upcoming change is the latest in a series of moves to tighten eligibility rules in order to limit temporary residents, including international students and foreign workers. Those changes include imposing caps on the percentage of low-wage foreign workers in some sectors and ending permits in metropolitan areas with high unemployment rates.

Temporary foreign workers in the agriculture sector are not affected by past rule changes.

This report by The Canadian Press was first published Oct. 21, 2024.

— With files from Nojoud Al Mallees

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Economy

PBO projects deficit exceeded Liberals’ $40B pledge, economy to rebound in 2025

Published

7 days ago

October 17, 2024

Anne Joseph

OTTAWA – The parliamentary budget officer says the federal government likely failed to keep its deficit below its promised $40 billion cap in the last fiscal year.

However the PBO also projects in its latest economic and fiscal outlook today that weak economic growth this year will begin to rebound in 2025.

The budget watchdog estimates in its report that the federal government posted a $46.8 billion deficit for the 2023-24 fiscal year.

Finance Minister Chrystia Freeland pledged a year ago to keep the deficit capped at $40 billion and in her spring budget said the deficit for 2023-24 stayed in line with that promise.

The final tally of the last year’s deficit will be confirmed when the government publishes its annual public accounts report this fall.

The PBO says economic growth will remain tepid this year but will rebound in 2025 as the Bank of Canada’s interest rate cuts stimulate spending and business investment.

This report by The Canadian Press was first published Oct. 17, 2024.

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Economy

Statistics Canada says levels of food insecurity rose in 2022

Published

1 week ago

October 16, 2024

Anne Joseph

OTTAWA – Statistics Canada says the level of food insecurity increased in 2022 as inflation hit peak levels.

In a report using data from the Canadian community health survey, the agency says 15.6 per cent of households experienced some level of food insecurity in 2022 after being relatively stable from 2017 to 2021.

The reading was up from 9.6 per cent in 2017 and 11.6 per cent in 2018.

Statistics Canada says the prevalence of household food insecurity was slightly lower and stable during the pandemic years as it fell to 8.5 per cent in the fall of 2020 and 9.1 per cent in 2021.

In addition to an increase in the prevalence of food insecurity in 2022, the agency says there was an increase in the severity as more households reported moderate or severe food insecurity.

It also noted an increase in the number of Canadians living in moderately or severely food insecure households was also seen in the Canadian income survey data collected in the first half of 2023.

This report by The Canadian Press was first published Oct 16, 2024.

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