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Economy

Putin’s War to Lop $190 Billion Off Russia’s Economy in Delayed Reckoning

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Russia avoided an economic debacle in the aftermath of President Vladimir Putin’s war in Ukraine, in what was an opening act of a slow-burning crisis that will play out in the years to come.

An economy Putin once wanted to make one of the world’s five biggest is on a path to lose $190 billion in gross domestic product by 2026 relative to its prewar trajectory, according to Bloomberg Economics, roughly the equivalent of the entire annual GDP of countries like Hungary or Kuwait.

But even as Russia logged its third straight quarter of contraction to end 2022, its downturn for the whole year was a fraction of the almost 10 percent collapse that was predicted a month after the invasion. The central bank has put last year’s drop at 2.5 percent and projects growth may resume already this year.

The decline probably intensified last quarter in annual terms and may be even worse to start this year, according to analysts polled by Bloomberg.

In what would be the sharpest contraction since the height of the global pandemic, data due on Friday will show GDP dropped an annual 4.6 percent in the fourth quarter, the Bloomberg poll showed.

“The effect of the sanctions is prolonged,” said Oleg Vyugin, a former top central bank and Finance Ministry official. “And the sanctions process hasn’t ended. More and more new ones are being introduced.”

The sanctions didn’t cover major Russian exports vital to world markets, such as oil and gas and farm products, though some restrictions on energy were added in the last few months.

Still, the resilience shown so far speaks to years of effort by technocrats close to Putin to steel the economy against disruption with policies that stowed away windfall energy revenue and tried to make Russia less dependent on some imports.

At stake now is Putin’s ability to sustain the biggest conflict in Europe since World War II by continuing to marshal the resources, but without antagonizing a population that’s increasingly worried about its financial wellbeing.

What Bloomberg Economics Says…

“Big countries with control of crucial resources, competent economic policy makers and powerful allies aren’t going to crumble in the face of even very severe sanctions. Russia is all four.”

—Alexander Isakov, Russia economist. 

The job will only get harder this year as Putin’s government races to stave off a collapse in oil revenues and ramps up spending on social programs at a time when the mobilization of hundreds of thousands of men is hollowing out the labor market.

Analysis by Bloomberg Economics identified several clues to Russia’s economic survival after the imposition of unprecedented sanctions that included asset seizures targeting individuals close to Putin and saw about $300 billion in international reserves blocked.

The need of the US and its allies to preserve access to energy led them to strike a compromise in balancing punitive moves with their own self-interest. Russia actually pumped more oil, and high commodity prices meant it earned enough to prop up its income by seizing on demand from the likes of China and India.

Countries accounting for more than 30 percent of global GDP maintained trade ties and refrained from condemning the invasion, enabling Russia to rebuild supply chains and fight off economic isolation.

For Vyugin, a veteran Russian banker and economist, the sanctions were “less a knockout blow than a light jab.” Bloomberg News

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

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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.

The Canadian Press. All rights reserved.

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Trump’s victory sparks concerns over ripple effect on Canadian economy

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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.

The Canadian Press. All rights reserved.

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Economy

September merchandise trade deficit narrows to $1.3 billion: Statistics Canada

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OTTAWA – Statistics Canada says the country’s merchandise trade deficit narrowed to $1.3 billion in September as imports fell more than exports.

The result compared with a revised deficit of $1.5 billion for August. The initial estimate for August released last month had shown a deficit of $1.1 billion.

Statistics Canada says the results for September came as total exports edged down 0.1 per cent to $63.9 billion.

Exports of metal and non-metallic mineral products fell 5.4 per cent as exports of unwrought gold, silver, and platinum group metals, and their alloys, decreased 15.4 per cent. Exports of energy products dropped 2.6 per cent as lower prices weighed on crude oil exports.

Meanwhile, imports for September fell 0.4 per cent to $65.1 billion as imports of metal and non-metallic mineral products dropped 12.7 per cent.

In volume terms, total exports rose 1.4 per cent in September while total imports were essentially unchanged in September.

This report by The Canadian Press was first published Nov. 5, 2024.

The Canadian Press. All rights reserved.

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