Let us tally up the butcher’s bill.
As of Thursday, nearly 8,500 Canadians had died from COVID-19, and more than 102,000 had contracted it. Thankfully, the number of new cases and deaths has steadily declined, and is now low. But the nationwide shutdown that flattened the curve has been exceptionally costly. The medicine’s side effects have been devastating.
Canada experienced the worst economic contraction since the Great Depression. A record number of Canadians are jobless; just one program to support them, the Canada Emergency Response Benefit, is expected to cost $71.3-billion. The Parliamentary Budget Officer says the economy will finish the year $222-billion smaller, and the federal deficit will top $250-billion.
Canada imposed this pain on itself because, in the fight against the virus, it lacked other, more surgical tools.
As we near the end of the first round against the pandemic, Canada must give itself those precision tools.
Governments, led by Ottawa, were good at rushing out hundreds of billions of dollars to help jobless Canadians. They have been much less adroit at taking steps – much less costly steps – to obviate the need for businesses to shutter, and people to go without work.
What does Canada need to give itself a fighting chance at reopening, and staying open?
Testing and contact tracing: This week, Dr. Bonnie Henry, British Columbia’s Provincial Health Officer, released some new modelling. “As we have relaxed distancing measures,” reads one of her slides, “strong contact tracing in B.C. has provided a buffer against renewed growth of cases.”
When testing shows that someone is infected, the next step is tracking down everyone they recently came into contact with. B.C.‘s modelling assumes that the less physical distancing there is, the more contact tracing is needed, and the faster it must be.
If Canadian public-health authorities can quickly track down every contact of an infected person, as happens in successful countries such as South Korea, then more economic shutdown measures can be eased. But to the extent that contact tracing is slow or incomplete, more physical distancing, and more restrictions on normal life, will likely be needed to prevent new outbreaks.
Masks: Can you name Canada’s first prime minister? A quarter of Canadians can’t. Do you know that the Queen is the head of state? Then you know something four out of five Canadians don’t. And while you may have heard that public-health officials “strongly advise” wearing a mask when in a public space, many Canadians clearly haven’t. In some stores, most customers are masked. In others, almost nobody is.
The message about masks needs to be clear and simple. It needs to be a rule, not one more bit of vague advice. Public-health authorities in each province, and at the local level, should have the power to order masking in public places, and to lift those orders when and where risks are low. The experience of several Asian countries suggests that masks may have a big impact in stemming the spread of the virus.
Protect seniors: The vast majority of Canadians killed by COVID-19 were residents of a long-term care facility. Canada, according to one recent study, has the world’s worst record on that score. Those are dismal statistics, but hidden in them is a sign of hope.
Quebec has a death rate from COVID-19 that is as high as Italy’s, because of so many fatalities in nursing homes. B.C., despite having the country’s first nursing-home outbreak, prevented a multiplication of cases in those facilities – and as a result, the province’s overall death rate is barely higher than that of the most successful countries, such as Australia and South Korea. B.C. shows it is possible to protect the vulnerable, if the right steps are taken.
The border: Canada’s COVID-19 case count may be low and falling, but numbers are high and rising in the United States. That means keeping a lock on the border, and banning American tourists, is more important than ever. It also means we need a system to quickly test essential border-crossers, such as airline crew and truckers.
More hopefully, Canada may be able to look at eventually expanding our national bubble, by negotiating quarantine-free travel to and from low-infection countries such as South Korea, Taiwan, Japan and Australia. But that can’t happen until we show that our own house is in order.
German economy likely to grow again from October or November: minister – The Guardian
BERLIN (Reuters) – Europe’s largest economy will likely start to grow again from October or November, German Economy Minister Peter Altmaier said on Wednesday.
The German economy has been battered by the coronavirus crisis, with economic output contracting by 2.2% in the first quarter, its steepest rate since 2009.
The government expects the economy to shrink by 6.3% this year, its worst recession since World War Two.
(Reporting by Michelle Martin, editing by Thomas Escritt)
Does the Trudeau government have a plan to end the pandemic economy? – CBC.ca
In a normal year, the federal government tables a budget in the spring and then an economic statement or fiscal update in the fall.
But this is not a normal year. The budget that was supposed to be presented in March was pushed back and then completely swamped by the first wave of COVID-19, the economic shutdown that resulted and the federal aid that soon followed.
Some opposition MPs and economists subsequently pushed for a fiscal update. The Liberal government contended, with some justification, that making long-term projections in a time of such incredible uncertainty would be — to use Prime Minister Justin Trudeau’s words — “an exercise in invention and imagination.”
What’s being released this afternoon is being described instead as a fiscal “snapshot” — a status report on where things stand after four months of the pandemic.
It should provide some insight into what the last four months have meant for the federal government’s balance sheet and Canada’s economy. Ideally, it also would offer some sense of what the future might look like — at least the near future.
The deficit is going to be alarming
Finance Minister Bill Morneau’s presentation is not expected to offer new policy announcements, but it could further quantify both the economic disruption and the government’s response to that shock. That undoubtedly will include the projection of a large deficit for the current fiscal year.
The exact number might be new, but it’s already clear that the deficit likely will be in excess of $250 billion.
Last fall, months before the first cases of COVID-19 were detected in China, Morneau projected that the deficit for 2020-2021 would be $28.1 billion. Since then, a lot has changed.
This spring’s pause in economic activity and employment meant a drop in the revenue the government receives from taxes. Meanwhile, more money has been going out in the form of government support measures to help individuals and businesses get through the shutdown.
Since April, the Liberal government has provided bi-weekly updates on its relief spending to the finance committee of the House of Commons. The most recent tally, provided on June 25, showed $174.1 billion in direct support for individuals and businesses and $19.4 billion in federal funding for health and safety measures.
The office of the Parliamentary Budget Officer also has provided a regularly updated “scenario analysis” that projects the broad economic and fiscal implications. In its most recent analysis, released on June 18, the PBO projected a deficit of $256 billion for 2020-2021.
As a percentage of Canada’s GDP, a deficit of that size would be the largest for the federal government since the Second World War.
There has been little to no debate about the need to spend the money on emergency relief; if anything, the Liberals have been under political pressure to spend more and faster. Recent analysis by Scotiabank found that failing to provide that relief would have led to much worse economic results and an only slightly lower level of federal debt.
But after any deficit-related sticker shock wears off, the next question will be how well the government is positioned to manage that accumulated debt.
Governments are not like households — a government can effectively carry debt in perpetuity — so their primary goal is to manage that debt rather than pay it off outright. Most of the fiscal analysis of government debt focuses on its size in comparison to the national economy.
The PBO estimated that the federal debt-to-GDP ratio will reach 44.4 per cent, while Scotiabank projects that the ratio will be closer to 48 per cent.
It’s bad — but it’s been worse
Either number would be a significant increase over what Morneau projected last fall, when the Liberals forecast a debt-to-GDP ratio of 31 per cent in 2020-2021, declining annually thereafter.
But something around 45 per cent also would still be well below Canada’s historic peak of 66.6 per cent back in 1995-1996. That debt ratio, coupled with high interest rates and nervous international markets, led Jean Chrétien’s government to make drastic cuts to balance the budget and get the national debt under better control.
If the federal debt-to-GDP does increase to 45 per cent, it will be back to where it was in 2001.
But the fiscal story of COVID-19 will be only partly about what has happened over the last four months. It also will be about what happens over the next few months — and then several years after that.
Where do we go from here?
It’s not clear how far into the future the Liberal government is willing to look, but there are a number of questions it could start trying to answer.
What are the potential pathways for economic recovery? How much longer might the temporary relief measures be needed? How much more new spending might be necessary? And how does Morneau see the recovery and the debt being managed?
“There will be significant unemployment across Canada for the duration of the recovery,” Rebekah Young, director of fiscal and provincial economics at Scotiabank, told CBC’s Power & Politics on Tuesday.
“The [employment insurance system] was not and is not sufficient to cover all Canadians that will be out of work, but the [Canadian Emergency Response Benefit] clearly is too expensive for that duration. So I think … we would like to see some signals that they have a plan for the next 18 months in terms of addressing his persistent shock that the economy will be facing.”
In an email, Young said she thinks Wednesday’s “snapshot” could set up a fall budget that lays out longer-term plans.
“In addition to an updated statement of transactions, the country needs a fiscal plan from the federal government,” said Kevin Page, the former parliamentary budget officer who is now president of the Institute of Fiscal Studies and Democracy at the University of Ottawa. “We need a fiscal plan to understand what role federal fiscal policy will play to support the recovery.”
A proper plan, Page said, would boost consumer confidence and investor confidence and mitigate the possibility of further downgrades to Canada’s credit rating.
Finance officials might be quick to note the unprecedented amount of uncertainty at the moment, but Page said a plan could be debated and adjusted.
“A ‘snapshot’ that is only backward-looking would be a major missed opportunity,” he said.
In the midst of managing a national response to a pandemic, it’s important to not get ahead of yourself — to focus on the crisis in the here and now.
But sooner or later, the federal government will need to confront the future.
French economy seen rebounding 19% in third quarter, 3% in fourth quarter: INSEE – TheChronicleHerald.ca
PARIS (Reuters) – The French economy is set to rebound sharply in the second half of the year after an unprecedented slump in the first half due to the coronavirus lockdown, the INSEE statistics agency said on Wednesday.
The euro zone’s second-biggest economy likely contracted 17% in the second quarter from the previous three months, unchanged from a June forecast and already on the heels of a 5.3% slump in the first quarter, INSEE said.
The economy was set to rebound 19% in the third quarter and a further 3% in the fourth quarter with activity seen 1-6% below pre-crisis levels by December, it added.
Over the course of the year, INSEE estimated that the economy was set to contract 9%, France’s worst recession since modern records began in 1948 but not as bad as the 11% slump the government forecast in its last revision to the 2020 budget.
The government put France under one of the strictest lockdowns in Europe in mid-March, but the economy saw a “gradual, but sharp recovery” in the weeks after the government began lifting restrictions on May 11, INSEE said.
(Reporting by Leigh Thomas; Editing by Tom Hogue and Andrew Heavens)
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