Canada’s economy was headed for slowing growth in the next decade even if COVID-19 had never hit, according to a new report by Deloitte Canada.
The report, which looks at more than 1,000 variables to predict how Canada’s economy will look in 2030, suggests that the country will need more workers — with greater productivity — to get the economy chugging at a fast enough pace to pay for climate change initiatives and government investments without raising taxes.
“We believe Canada is the best place in the world to live and work and do industry. If we continue on our current path, that is compromised or in jeopardy,” said Deloitte Canada chief executive Anthony Viel.
The consulting and audit firm’s report comes as the government is laying out ambitious plans to spur the economy forward after the COVID-19 pandemic — and ensuing lockdown — left a record number of Canadians jobless. Last week’s speech from the throne suggested that the government will look toward clean energy investments, as well as disability and jobless supports, in its recovery plan.
Deloitte Canada did not directly address the throne speech in its report. But the firm predicts even a complete return to pre-pandemic “normal” would cause economic growth to slow to 1.7 per cent per year in the next decade. That’s below the past decade’s average of 2.2 per cent growth — which was already lower than the 3.2 per cent growth in the decade leading to the 2008 and 2009 recession.
Amid a low fertility rate — at a time when the share of Canadians over age 65 is expected to nearly double — Canada needs to be more inclusive of groups that are underemployed in the economy, the report found. Getting marginalized groups better integrated in the workforce can grow the tax base and help the government avoid raising tax rates, said Georgina Black, Deloitte Canada’s managing partner of government and public services.
Deloitte’s forecast suggests that the country could replace its retiring workforce by improving employment options for 88,500 women; 377,300 Canadians over age 65; 700,000 immigrants; 517,657 people with disabilities; and between 38,000 and 59,000 Indigenous Canadians.
The theory, Deloitte’s report said, is that boosting the number of hours worked in the economy would lift the pace of yearly economic growth by 50 per cent, adding $4,900 to Canadians’ average annual income by 2030, Deloitte estimated.
For instance, Deloitte cited a survey suggesting that more than 600,000 Canadians with disabilities said they would look for work if minor workplace barriers were removed.
“Many of these inequalities have worsened during the pandemic, with women and under-represented groups far more likely to become unemployed than men or non-racialized groups,” the report said.
Deloitte suggests companies need better disability accommodations and workplace inclusion policies, and should add childcare as a benefit package, noting that during COVID-19, women’s workforce participation dipped to 55 per cent for the first time since the mid-1980s as childcare options dwindled.
In Deloitte’s ideal recovery scenario, schools would offer better apprenticeship options and retraining programs for older workers in shrinking industries, and governments would invest in rural internet infrastructure and childcare for working parents. Regulators would step in under Deloitte’s plan and allow skilled immigrants to use their foreign credentials and degrees. Canada loses as much as $50 billion each year that could be contributed by underemployed immigrants, the firm said.
Despite requiring the government to spend money and set incentives for employers, Deloitte claims that its proposal would boost government revenues by nine per cent without raising taxes.
“More workers and more incomes means more taxes and more investment,” said Viel.
Canadian businesses also need to invest more in technology and late-stage startups, and Deloitte suggested investments should be focused on a few high-growth industries where Canada can be a leader, such as construction, medical equipment and computer system design.
“Government and business (need to) create the conditions where companies want to invest here and not in another country, ” said Black.
Anita Balakrishnan, The Canadian Press
Canadian economy caps strong third quarter before slowdown – BNN
Canada’s economy recorded what are likely its last strong months of growth in August and September, as the country braces for an end-of-year slowdown.
Gross domestic product expanded 1.2 per cent in August, Statistics Canada said Friday in Ottawa. The agency also released a preliminary estimate for September, which showed a 0.7 per cent expansion — a fifth straight month of historically elevated readings as the economy rebounded from a sharp contraction from the COVID-19 lockdowns.
With September figures in, the data suggest the economy grew 10 per cent in the third quarter, the agency said, implying about 46 per cent growth on an annualized basis — which would be an all-time high.
“The numbers are solid overall,” David Doyle, an economist at Macquarie Capital Markets, said by email.
But things will get much slower from here. This week the Bank of Canada projected annualized growth of only one per cent in the final three months of the year, and reiterated expectations for a drawn out recovery over the next several quarters.
Canada’s currency appreciated slightly on the report, rising 0.2 per cent to $1.3295 against the U.S. dollar at 9:07 a.m. Toronto time. The yield on government two year bonds was little changed at 0.25 per cent.
The numbers suggest economic activity in September was about 96.1 per cent of output levels in February.
Economists were expecting 0.9 per cent growth in August, according the the median forecast in a Bloomberg survey.
Warmer weather, lower virus counts and mass re-openings encouraged a surge in retail spending between July and September. In addition, pent-up demand for housing led to a boom in construction and real estate in the third quarter.
The September reading is still a “solid starting point” for the fourth quarter, Derek Holt, an economist at Bank of Nova Scotia, said by email. He estimates a fourth-quarter gain of 3.5 per cent annualized, compared with the Bank of Canada’s one per cent estimate.
Canada's economy grew 1.2% in August as pace of growth cools down – Radio Canada International – English Section
Statistics Canada says the pace of economic growth slowed in August as real gross domestic product grew 1.2 per cent in the month. (Matt York/THE CANADIAN PRESS/AP)
Canada’s economy grew by 1.2 per cent in August slightly higher than what economists were expecting but significantly slower than in previous months as the pace of economic recovery began losing steam.
In July, Canada’s economy had grown by 3.1 per cent, the national statistics agency said Friday.
Statistics Canada noted that August marked the fourth straight month of growth following the steepest drops on record back in March and April amid pandemic lockdowns.
The economy was expected to grow by further 0.7 per cent in September, according to Statistics Canada’s preliminary estimate.
Both goods-producing and services-producing industries were up as 15 of 20 industrial sectors posted increases and two were essentially unchanged in August, Statistics Canada said.
August saw healthy increases in the public sector, especially in education, professional services, manufacturing and construction, the data agency said.
Accommodation and food services, the hardest hit sectors by the pandemic, also continued their recovery, though at a much slower pace.
However, the mining, quarrying, and oil and gas extraction sector decreased 1.7 per cent in August, Statistics Canada said.
RBC economist Claire Fan said the economy has retraced around 75 per cent of the losses earlier in spring, but still sits about five per cent below February’s pre-pandemic level.
The bigger concern is how much of that third quarter growth can be sustained beyond September, Fan said.
COVID cases have been on the rise, prompting local governments to re-introduce some containment measures in hotspots, she said.
“The less stringent and more targeted response this time around probably means activity held up much better than it did back in April,” Fan wrote in a research note to clients. “But the economic rebound was already slowing ahead of the virus resurgence, and there is still clearly a risk that broader containment measures could yet be needed.”
Fan said she expects growth in activity for the industrial sector and some services industries like retail and professional services to persist beyond September.
But hospitality industries, alongside the oil and gas sector, will once again face much bigger challenges as demand weakens, she warned.
Lifted by U.S., Mexico economy rebounds 12% in third quarter from coronavirus – The Journal Pioneer
By Dave Graham
MEXICO CITY (Reuters) – Mexico’s economy grew 12.0% during the third quarter, largely as expected, making up for much of the record contraction over the previous three months at the height of the coronavirus lockdown, preliminary data showed on Friday.
The seasonally-adjusted jump in gross domestic product (GDP) published by national statistics agency INEGI was fractionally better than the 11.9% expansion predicted by a Reuters poll.
The quarter-on-quarter increase was easily the biggest since current records began at the start of the 1980s, and benefited from massive stimulus spending in the United States.
U.S. demand helped Mexico rack up large trade surpluses during the past four months, as exports picked up speed, especially in the automotive industry. By contrast, domestic demand has lagged, with many businesses still struggling.
Alfredo Coutino, an economist at Moody’s Analytics, said Mexico was still heavily reliant on the U.S. economy, and forecast the recovery would slow in the months ahead.
“The Mexican economy is benefiting from the upturn in the U.S. business cycle, mainly through the U.S. demand for Mexican exports and remittances sent by Mexican migrants working in the U.S.,” Coutino said in a research note.
Between April and June, at the peak of Mexico’s pandemic lockdown, the economy shrank 17.1% from the first quarter.
Mexico has not recovered as quickly as the U.S. economy, which shrank by an annualized rate of 31.4% in the second quarter then jumped by 33.1% in the July-September period.
Despite the economic chaos of the pandemic, remittances to Mexico have surged this year, and President Andres Manuel Lopez Obrador has forecast they will reach a record $40 billion.
During a regular news conference, Lopez Obrador hailed the GDP figures as evidence the economy was bouncing back.
A breakdown of the data showed primary activities like farming, forestry and fishing advanced by 7.4% compared with the previous quarter. Secondary activities such as manufacturing increased by 22.0%, INEGI said. Meanwhile tertiary activities, which encompass consumer spending and services, climbed 8.6%.
Lopez Obrador was eager to point out that the primary sector, which he has pushed with schemes to boost farming and tree planting, is doing better now than it was a year ago.
Mexico’s economy is forecast to shrink almost 10% in 2020, its deepest annual contraction since the Great Depression.
However, primary activities, which make up only a small part of the economy, were up 2.7% in the first nine months of this year compared with the same period in 2019, INEGI said.
The severest months for the Mexican economy were April and May, when much of business activity ground to a halt, leading to the loss of roughly one million formal jobs. By Oct. 28, more than 400,000 jobs had been recovered, Lopez Obrador said.
Compared with the same period last year, Latin America’s no. 2 economy shrank by 8.6% in unadjusted terms in the third quarter, just less than the Reuters forecast of 8.7%.
Final third quarter data is due to be published on Nov. 26.
(Reporting by Dave Graham; Editing by Hugh Lawson, Chizu Nomiyama and Marguerita Choy)
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