Optimism that the early arrival of a vaccine meant that the global economy would be out of the woods in 2021 is facing a rethink as COVID-19 resurges and mutates.
There remains every possibility that an efficient rollout of the vaccine in Canada and elsewhere really will lead to signs of a recovery well before the end of this year. But there are voices suggesting that the pandemic may hold more bad news in store.
Certainly the year’s first day of market trading was less than auspicious.
“Stocks hit records early in the session as investors focused on the rollout of COVID-19 vaccines,” Reuters reported. “But investors quickly turned cautious over the path of the virus, which continues to spread amid the discovery of a new variant.”
It is never a good idea to put too much stock in a single day’s trading or the instant analysis of sudden market moves, but Monday’s decline — which saw a fall in the technology-heavy Nasdaq market of nearly three per cent — added to a feeling of unease.
Triggering tighter restrictions
“As the new COVID-19 strain triggers tighter restrictions on economic activity and limits even more the movement of people, it has become increasingly clear that the road to vaccine-induced immunity will now have more potholes,” Mohamed El-Erian, a well-known U.S. adviser to financial corporations who is now president of Queen’s College, Cambridge, wrote in Tuesday’s Financial Times.
El-Erian worried that the struggle to recover from the pandemic’s economic impact would lead to misguided efforts by countries toward a “further weaponization of trade tariffs” and a destabilizing polarization in politics and income.
Ambulances line up in London on Tuesday, where a more virulent strain of COVID-19 has contributed to a renewed outbreak and new economic closures. Case and death rates in regions that remained largely open mean places such as Britain have faced growing pressure to take stronger action. (Hannah McKay/Reuters)
Virologists warn of not just a single new strain but a series of continuing mutations as the disease spreads around the world, constantly evolving through accidental changes in its genetic makeup. Then, as we have already seen, the most virulent versions out-compete their viral cousins to sweep back out and around the world.
With luck, the faster-spreading mutations will be no worse — and could theoretically be milder. But some scientists in the United Kingdom have warned that current vaccines may not be as effective on one new variant in South Africa.
The more virulent European version has already turned up in the United States and Canada. As of this writing, the one found in South Africa has not yet been spotted here, but experience with previous transmission waves implies its arrival is inevitable.
Meanwhile, the idea that countries and regions can fight the virus while keeping the economy intact is facing contradictory evidence.
Case and death rates in regions that remained largely open mean places such as Britain and the U.S. have faced increasing public pressure to take stronger action, even as the economy weakens. Places that imposed severe lockdowns earlier in the battle against the pandemic, such as Australia and China, have seen relative economic success.
Police patrol the streets of Johannesburg on Jan. 1 during a curfew imposed after a new variant of the coronavirus was found. Some scientists in the U.K. have warned that current vaccines may not be as effective on the variant in South Africa. (Siphiwe Sibeko/Reuters)
World Bank worries about debt, education breakdown
China’s economic data is commonly disputed, but the World Bank suggests growth in the country will rebound to about eight per cent this year.
In its newly released Global Economic Prospects report for 2021, the World Bank fears a lingering impact from the virus — what it warned could be a “lost decade,” especially for countries that failed to get on top of the pandemic early.
“Many countries are expected to lose a decade or more of per-capita income gains,” the World Bank report said. “Downside risks include the possibility of a further resurgence of the virus, more severe effects on potential output from the pandemic and financial stress.”
Besides the immediate damage to the economy caused by interruptions to trade, domestic commercial activity and job losses, the World Bank worries that such factors as a huge piling up of public and private debt and a breakdown in education will lead to a prolonged deterioration in economic prospects.
A nearly empty Pearson International Airport in Toronto on Dec. 30. In parts of Canada and in the U.K., calls for stricter measures — including more severe limits on travel intended to combat the spread of COVID-19 — make hopes for an economic rebound in 2021 seem less certain. (Carlos Osorio/Reuters)
In parts of Canada and in the U.K., calls for stricter measures — including more severe limits on travel intended to combat holiday-induced spread and growing pressure on hospitals — mean earlier hopes that the autumn rebound would continue into 2021 seem less certain.
Although they may be distorted by the holidays, jobs data for both the U.S. and Canada are due on Friday and will offer the freshest possible update on whether the slow but steady uptick in the Canadian economy has stalled.
Gross domestic product figures released two weeks ago showed that growth has continued to creep up ever since April’s big dip. If that continues, it won’t strictly be a V-shaped recovery, but maybe a V written by a four-year-old that stretches out a bit too far to the right.
That may have changed. The GDP data was from October when everyone was far more optimistic, whereas Statistics Canada collected the December jobs data that we’ll see on Friday just weeks ago.
Those employment figures may offer a first hint if the right-hand bar of the V has jogged down, making it into something closer to a W — the potential indicator of a double-dip recession.
WATCH | Making vital supplies became saviour for manufacturers during pandemic:
As the pandemic ramped up, Canada’s manufacturing sector nimbly shifted gears and started making products to keep people safe from COVID-19. Even among manufacturers, it reminded people what happens when a country makes its own necessary goods. 2:09
OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.
Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.
Business, building and support services saw the largest gain in employment.
Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.
Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.
Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.
Friday’s report also shed some light on the financial health of households.
According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.
That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.
People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.
That compares with just under a quarter of those living in an owned home by a household member.
Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.
That compares with about three in 10 more established immigrants and one in four of people born in Canada.
This report by The Canadian Press was first published Nov. 8, 2024.
The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.
The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.
CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.
This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.
While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.
Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.
The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.
This report by The Canadian Press was first published Nov. 7, 2024.
Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.
As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.
Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.
A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.
More than 77 per cent of Canadian exports go to the U.S.
Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.
“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.
“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”
American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.
It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.
“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.
“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”
A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.
Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.
“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.
Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.
With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”
“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.
“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”
This report by The Canadian Press was first published Nov. 6, 2024.
