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Looking Ahead To 2021 And The Economic Impact Of Covid-19 – Forbes

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by Linda Yueh, Adjunct Professor of Economics, London Business School

With the rollout of vaccines for Covid-19 last week, the control of the pandemic has begun. The dramatic speed of the development of the vaccines will need to be matched by production and distribution. AstraZeneca has announced that its vaccine developed with the University of Oxford will make two billion doses which will help developing countries. It will take a considerable amount of time until mass vaccinations have occurred everywhere in the world, but governments are now in a better position to plan for the economic recovery.

There will be need for government spending to reduce the risk of permanent damage to the economy from the shock of this global pandemic, which has caused contractions in GDP that are unparalleled in modern history for most economies.

For developed and emerging economies, the International Monetary Fund (IMF) estimates that national output will contract by nearly 6% in 2020, except for China which is forecast to grow. But the speed of recovery is vastly different. For developed economies, GDP is forecast to be a sizeable -4.7% before the pre-pandemic level in 2019. But for emerging economies, excluding China, the loss in output will be a staggering -8.1%.

Central bank policies are pointing to a prolonged recovery as well. The Federal Reserve has signalled that it will keep interest rates at rock bottom until at least the end of 2023. The European Central Bank has extended its pandemic emergency purchase programme until March 2022 while reinvesting its proceeds, i.e., continuing to inject cash, until at least the end of 2023. Both central banks are indicating they are supporting the economy with loose monetary policy for the next three years. It’s a reflection of the scale of economic damage from the pandemic.

Most countries will also need fiscal policies that boost growth to prevent the loss in output from becoming permanent. Some economies are fiscally constrained so they will have limited ability to borrow to spend, which captures some of the differences between the recovery trajectories between advanced economies and emerging economies. While developed economies face record low borrowing costs, a number of developing economies are in need of debt relief and have less capacity to use fiscal policy which will hamper their recoveries.

In terms of the recovery, the spending should be tailored to jobs. To prevent hysteresis, which is when an unemployment shock lowers growth potential, government spending will need to support jobs and try to prevent discouraged workers which in turn lowers the labour force participation in the economy. The extension of various furlough schemes in Europe into the next year or so as well as the new US stimulus package that is being debated in Congress are both aimed at this issue.

Keeping viable businesses, which are also employers, is another important aspect. For instance, the UK is planning to create a permanent new state-backed loan scheme for SMEs starting in January to replace the Covid-19 programme, which at £65 billion was a sizeable part of the government support.

For advanced economies, the recovery spending can also be designed to support longer-term growth aims (e.g., green growth) and address long-standing challenges (e.g., low productivity). The IMF has changed its emphasis during Covid-19 to encourage countries which can afford to do so to borrow to invest, shifting the emphasis from fiscal discipline to promoting economic growth that can take advantage of record low interest rates.

In their latest World Economic Outlook, the IMF estimated that during periods of high uncertainty such as a global pandemic, 1% of GDP spent on public infrastructure will generate 2.7% in GDP growth and raise employment by 1.2% after two years as well as boost private investment. That translates into between two to eight jobs for each million dollar invested in traditional infrastructure. But, if it is on green infrastructure, such as green electricity or R&D, there would be a bigger impact of five to 14 jobs created by every $1 million invested by the state. The lower capital stock and higher technological component of green investments could generate a larger effect than traditional infrastructure. But there is variation there as well. For instance, digital infrastructure could provide better access and faster broadband that supports remote working and greater e-commerce. Better transport links would help with hybrid working and online deliveries.

In short, creating jobs and boosting greener growth would focus the extraordinary amounts of government spending on both near-term needs and longer-term aims.

Additionally, if governments were to distinguish between current and capital spending, then bond investors can assess whether there will be a longer-term growth impact from the latter spending. Raising the growth rate of the economy relative to the increase in debt would help with the debt-to-GDP ratio typically used in debt sustainability analysis. It won’t be the final word on public finances, but the countries which have spent strategically may be assessed more favourably by creditors.

At the end of 2020, even though the upcoming winter months will be challenging, due to the speed of vaccine development, it is possible to look ahead and start planning more rigorously for the recovery phase.

Linda Yueh is Adjunct Professor of Economics at London Business School and the author of The Great Economists: How Their Ideas Can Help Us Today.

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A timeline of events in the bread price-fixing scandal

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Almost seven years since news broke of an alleged conspiracy to fix the price of packaged bread across Canada, the saga isn’t over: the Competition Bureau continues to investigate the companies that may have been involved, and two class-action lawsuits continue to work their way through the courts.

Here’s a timeline of key events in the bread price-fixing case.

Oct. 31, 2017: The Competition Bureau says it’s investigating allegations of bread price-fixing and that it was granted search warrants in the case. Several grocers confirm they are co-operating in the probe.

Dec. 19, 2017: Loblaw and George Weston say they participated in an “industry-wide price-fixing arrangement” to raise the price of packaged bread. The companies say they have been co-operating in the Competition Bureau’s investigation since March 2015, when they self-reported to the bureau upon discovering anti-competitive behaviour, and are receiving immunity from prosecution. They announce they are offering $25 gift cards to customers amid the ongoing investigation into alleged bread price-fixing.

Jan. 31, 2018: In court documents, the Competition Bureau says at least $1.50 was added to the price of a loaf of bread between about 2001 and 2016.

Dec. 20, 2019: A class-action lawsuit in a Quebec court against multiple grocers and food companies is certified against a number of companies allegedly involved in bread price-fixing, including Loblaw, George Weston, Metro, Sobeys, Walmart Canada, Canada Bread and Giant Tiger (which have all denied involvement, except for Loblaw and George Weston, which later settled with the plaintiffs).

Dec. 31, 2021: A class-action lawsuit in an Ontario court covering all Canadian residents except those in Quebec who bought packaged bread from a company named in the suit is certified against roughly the same group of companies.

June 21, 2023: Bakery giant Canada Bread Co. is fined $50 million after pleading guilty to four counts of price-fixing under the Competition Act as part of the Competition Bureau’s ongoing investigation.

Oct. 25 2023: Canada Bread files a statement of defence in the Ontario class action denying participating in the alleged conspiracy and saying any anti-competitive behaviour it participated in was at the direction and to the benefit of its then-majority owner Maple Leaf Foods, which is not a defendant in the case (neither is its current owner Grupo Bimbo). Maple Leaf calls Canada Bread’s accusations “baseless.”

Dec. 20, 2023: Metro files new documents in the Ontario class action accusing Loblaw and its parent company George Weston of conspiring to implicate it in the alleged scheme, denying involvement. Sobeys has made a similar claim. The two companies deny the allegations.

July 25, 2024: Loblaw and George Weston say they agreed to pay a combined $500 million to settle both the Ontario and Quebec class-action lawsuits. Loblaw’s share of the settlement includes a $96-million credit for the gift cards it gave out years earlier.

Sept. 12, 2024: Canada Bread files new documents in Ontario court as part of the class action, claiming Maple Leaf used it as a “shield” to avoid liability in the alleged scheme. Maple Leaf was a majority shareholder of Canada Bread until 2014, and the company claims it’s liable for any price-fixing activity. Maple Leaf refutes the claims.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:L, TSX:MFI, TSX:MRU, TSX:EMP.A, TSX:WN)

The Canadian Press. All rights reserved.

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S&P/TSX composite up more than 250 points, U.S. stock markets also higher

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TORONTO – Canada’s main stock index was up more than 250 points in late-morning trading, led by strength in the base metal and technology sectors, while U.S. stock markets also charged higher.

The S&P/TSX composite index was up 254.62 points at 23,847.22.

In New York, the Dow Jones industrial average was up 432.77 points at 41,935.87. The S&P 500 index was up 96.38 points at 5,714.64, while the Nasdaq composite was up 486.12 points at 18,059.42.

The Canadian dollar traded for 73.68 cents US compared with 73.58 cents US on Thursday.

The November crude oil contract was up 89 cents at US$70.77 per barrel and the October natural gas contract was down a penny at US2.27 per mmBTU.

The December gold contract was up US$9.40 at US$2,608.00 an ounce and the December copper contract was up four cents at US$4.33 a pound.

This report by The Canadian Press was first published Sept. 19, 2024.

Companies in this story: (TSX:GSPTSE, TSX:CADUSD)

The Canadian Press. All rights reserved.

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Construction wraps on indoor supervised site for people who inhale drugs in Vancouver

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VANCOUVER – Supervised injection sites are saving the lives of drug users everyday, but the same support is not being offered to people who inhale illicit drugs, the head of the BC Centre for Excellence in HIV/AIDS says.

Dr. Julio Montaner said the construction of Vancouver’s first indoor supervised site for people who inhale drugs comes as the percentage of people who die from smoking drugs continues to climb.

The location in the Downtown Eastside at the Hope to Health Research and Innovation Centre was unveiled Wednesday after construction was complete, and Montaner said people could start using the specialized rooms in a matter of weeks after final approvals from the city and federal government.

“If we don’t create mechanisms for these individuals to be able to use safely and engage with the medical system, and generate points of entry into the medical system, we will never be able to solve the problem,” he said.

“Now, I’m not here to tell you that we will fix it tomorrow, but denying it or ignoring it, or throw it under the bus, or under the carpet is no way to fix it, so we need to take proactive action.”

Nearly two-thirds of overdose deaths in British Columbia in 2023 came after smoking illicit drugs, yet only 40 per cent of supervised consumption sites in the province offer a safe place to smoke, often outdoors, in a tent.

The centre has been running a supervised injection site for years which sees more than a thousand people monthly and last month resuscitated five people who were overdosing.

The new facilities offer indoor, individual, negative-pressure rooms that allow fresh air to circulate and can clear out smoke in 30 to 60 seconds while users are monitored by trained nurses.

Advocates calling for more supervised inhalation sites have previously said the rules for setting up sites are overly complicated at a time when the province is facing an overdose crisis.

More than 15,000 people have died of overdoses since the public health emergency was declared in B.C. in April 2016.

Kate Salters, a senior researcher at the centre, said they worked with mechanical and chemical engineers to make sure the site is up to code and abidies by the highest standard of occupational health and safety.

“This is just another tool in our tool box to make sure that we’re offering life-saving services to those who are using drugs,” she said.

Montaner acknowledged the process to get the site up and running took “an inordinate amount of time,” but said the centre worked hard to follow all regulations.

“We feel that doing this right, with appropriate scientific background, in a medically supervised environment, etc, etc, allows us to derive the data that ultimately will be sufficiently convincing for not just our leaders, but also the leaders across the country and across the world, to embrace the strategies that we are trying to develop.” he said.

Montaner said building the facility was possible thanks to a single $4-million donation from a longtime supporter.

Construction finished with less than a week before the launch of the next provincial election campaign and within a year of the next federal election.

Montaner said he is concerned about “some of the things that have been said publicly by some of the political leaders in the province and in the country.”

“We want to bring awareness to the people that this is a serious undertaking. This is a very massive investment, and we need to protect it for the benefit of people who are unfortunately drug dependent.” he said.

This report by The Canadian Press was first published Sept. 18, 2024.

The Canadian Press. All rights reserved.

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