Economy

IMF Chief Says Trade Divide Could Cost Global Economy $1.4 Trillion

Published

2 years ago

November 19, 2022

(Bloomberg) —

The rise of trade barriers against China and other countries over the past year could cost the global economy $1.4 trillion, on top of the severe damage being done by the war in Ukraine, the head of the International Monetary Fund said.

“What I am hoping to see is some reversals in policy blocks towards China and globally,” Kristalina Georgieva told Bloomberg Television’s Stephen Engle in an interview in Bangkok on Saturday. “The world is going to lose 1.5% of gross domestic product just because of division that may split us into two trading blocs. This is $1.4 trillion.”

For Asia, the potential loss could be twice as bad, or more than 3% of GDP, because the region is more integrated into the global value chain, Georgieva said on the sidelines of the Asia-Pacific Economic Cooperation’s economic leaders gathering this week.

While that would constitute significant damage to the global economy, the biggest factor hurting global growth remains the war in Ukraine, Georgieva said. “The single most damaging factor for the world economy is the war,” she said. “The sooner the war ends, the better.”

The IMF has also cautioned that inflation is hitting developing countries hardest, urging central bankers to keep up their fight to damp price growth and bring some relief, especially in food costs. Dollar appreciation in double-digits so far this year is continuing to cause headaches across emerging markets as investors flock to safe havens amid signs that much of the global economy could be headed toward recession.

Georgieva said that Asian countries must work together to overcome fragmentation in order to sustain growth, especially in the light of the multitude of other economic shocks from Covid-19, the war in Ukraine and the rising cost of living.

‘Throwing Gasoline’

“If we add on top of it the fragmentation in the world’s economy, it will be throwing gasoline on a fire,” she said. “Nobody will benefit from it.”

Still, she said nations in Asia are much better equipped to face economic shocks thanks to significant reserves and cooperation within the region.

On the rising risk of sovereign debt in developing countries, Georgieva said the IMF is “not yet alarmed but alert.” About 25% of emerging markets trade in distressed territory, while 60% of low-income countries are at or near debt distress. She encouraged nations strained by the rising cost of servicing dollar-denominated debt and the global economic environment to act preemptively and seek help early from the fund.

Bangladesh was the latest economy to reach a staff-level agreement with the IMF amid dwindling foreign reserves, securing a $4.5 billion loan earlier this month that’s subject to IMF management and board approval in the coming weeks.

The IMF’s research department earlier this week cast its outlook in a starker tone compared to last month, saying in a blog post that the difficulties are “immense.” The fund last month cut its forecast for global growth next year to 2.7%, far below the 3.8% it was predicting in January. It sees a 25% probability that growth will be less than 2%.

IMF calculations show that about one-third of the world economy will have at least two consecutive quarters of contraction this year and next, and that the lost output through 2026 will be $4 trillion.

Georgieva pointed to the particular difficulties facing the European Union because of the war in Ukraine, which could put pressure on the region’s central banks to reverse efforts to tackle inflation too soon.

“In Europe, the situation is more difficult as the impact of war in Ukraine is significant,” she said. “Half of the EU at least may be in recession next year.”

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Economy

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

Published

17 hours 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

5 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

6 days 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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