Connect with us

Economy

RBC predicts economy will fall into a recession later this year due to coronavirus impact, drop in oil – The Globe and Mail

Published

on


A recession is coming later this year as the economy is derailed by the impact of COVID-19 and a plunge in oil prices, economists said Friday.

Royal Bank of Canada forecasts the economy will grow at an annualized pace of 0.8 per cent in the first quarter, then contract in the second and third quarters of the year.

RBC is forecasting an annualized decline of 2.5 per cent in the second quarter and 0.8 per cent in the third quarter. Two consecutive quarters of negative growth is considered a recession.

Story continues below advertisement

“Key to the near term outlook and the pace of the recovery will be the policy response by governments,” RBC said in its report.

“The federal government’s plan to provide support measures to mitigate the impact of the virus included upping health care transfers, and increasing unemployment insurance, though both program increases were relatively limited.”

CIBC echoed the RBC comments in its own report that Canada is also likely on the brink of a recession.

“We expect to see output dropping in both the second and third quarters in the U.S. and Canada,” CIBC said in its report.

CIBC forecasts the economy will contract at an annual rate of 3.0 per cent in the second quarter and 3.4 per cent in the third quarter, before bouncing back and returning to growth in the final three months of the year.

The bank says fiscal and monetary stimulus will cushion the downside.

“But Canadians won’t really be out shopping again, and business confidence won’t roar back, until we have the virus under control, a better treatment, or a vaccine,” CIBC said.

Story continues below advertisement

“So, our assumption that growth resumes in the fourth quarter is therefore just that, an assumption about progress on some of those fronts here and in export markets abroad.”

The new forecasts came as governments advise against international travel and Ontario plans to close its schools for two weeks in addition to the week-long spring break holiday because of COVID-19.

Businesses have also moved to do their part in slowing the spread of the virus by urging employees to work from home where possible and limit travel.

The Juno Awards scheduled for the weekend in Saskatoon have been cancelled, while the National Hockey League and National Basketball Association have suspended their seasons. Major League Baseball has ended spring training in Florida and pushed back the start of the season.

The RBC forecast is based on an assumption that the impact of the virus will run its course by the end of the first half of the year, but an economic recovery will be prevented by persistent low oil prices.

The price of oil tanked this week as Saudi Arabia launched a price war with Russia which rejected production cuts that the kingdom had wanted.

Story continues below advertisement

In response, the Saudis moved to ramp up production in a bid to make it more painful for other oil-producing countries to continue without production cuts.

The Bank of Canada cut its key interest target by half a percentage point to 1.25 per cent last week in response to COVID-19 outbreak.

The central bank’s move prompted Canada’s big banks and financial institutions to drop their prime lending rates by a half percentage point.

The Bank of Canada also moved Thursday with an expansion of its bond buy-back program and term repo operations to proactively support interbank funding.

The central bank has said it remains committed to providing liquidity as required to support the functioning of the Canadian financial system.

Governor Stephen Poloz said last week the central bank wanted to cut rates “in a decisive manner” to provide a cushion for Canada’s economy against the effects of COVID-19.

Story continues below advertisement

He has said the immediate effects the virus will have on business investment and consumer spending meant the downside risks to the economy today outweighed continuing concerns that cutting rates would fan financial vulnerabilities in Canada, such as high household debt.

Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

India to invest $1.46 trillion to lift virus-hit economy – CTV News

Published

on


NEW DELHI —
India’s prime minister said Saturday his country has done well in containing the coronavirus pandemic and announced $1.46 trillion in infrastructure projects to boost the sagging economy.

The key lesson India learned from the pandemic is to become self-reliant in manufacturing and developing itself as a key supply chain destination for international companies, Prime Minister Narendra Modi said.

“The coronavirus epidemic is a big crisis, but it can’t stall India’s economic progress,” Modi said in a speech from New Delhi’s 17th century Mughal-era Red Fort to mark the 73rd anniversary of India’s independence from British rule. He wore an orange and white turban with a long scarf around his neck.

He also said that three vaccines are in different phases of testing in India and mass production will begin as soon as scientists give the green light. Modi said that “detailed plans are in place for large-scale production” of a vaccine that will be made “available to every Indian.”

India has confirmed more than 2.5 million virus cases, third behind the U.S. and Brazil. Its death toll of over 49,000 is fourth in the world.

Modi also announced a national digital heath plan under which every Indian will get an identity card containing all health-related information.

The celebrations were curtailed on Saturday because of the pandemic, with invitations going only to 4,000 guests instead of the usual 20,000, media reports said.

The International Monetary Fund projected a contraction of 4.5% for the Indian economy in 2020, a “historic low,” but said the country is expected to bounce back in 2021.

Modi said the government has identified 7,000 infrastructure projects to offset the economic impact of the pandemic.

“Infrastructure will not be created in silos anymore. All infrastructure has to be comprehensive, integrated and linked to each other. Multi-modal connectivity infrastructure is the way forward,” he said.

He said that India saw a record 18% jump in foreign direct investment in the past year, a sign that international companies are looking at the country.

Modi didn’t refer to China directly, but India is trying to capitalize on its rival’s rising production costs and deteriorating ties with the United States and European nations to become a replacement home for large multinationals.

Referring to border tensions with China, he said Indian forces had given a befitting response in the mountainous Ladakh region where thousands of soldiers from the two countries have been in a tense standoff since May. India said 20 of its troops died in hand combat with Chinese troops on June 15.

“Whether it’s terrorism or expansionism, India is fighting the challenges bravely,” Modi said in apparent references to threats from neighbouring Pakistan and China

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

India to invest $1.46 trillion to lift virus-hit economy – StCatharinesStandard.ca

Published

on


NEW DELHI – India’s prime minister said Saturday his country has done well in containing the coronavirus pandemic and announced $1.46 trillion infrastructure projects to boost the sagging economy.

The key lesson India learnt from the pandemic is to become self-reliant in manufacturing and developing itself as a key supply chain destination for international companies, Prime Minister Narendra Modi said.

“The coronavirus epidemic is a big crisis, but it can’t stall India’s economic progress,’’ Modi said in a speech from New Delhi’s 17th century Mughal-era Red Fort to mark 74 years of the country’s independence from British rule.

He also said that three vaccines are in different phases of testing in India and it will start mass production as soon as it got a green light from scientists.

India’s coronavirus death toll overtook Britain’s this week to become the fourth-highest in the world as the country reported over 2.5 million confirmed cases, just behind the U.S. and Brazil.

The International Monetary Fund projected a contraction of 4.5% for the Indian economy in 2020, a “historic low,” but said the country is expected to bounce back in 2021.

Modi said the government has identified 7,000 infrastructure projects to offset the economic impact of the pandemic.

He said that India saw a record 18% jump in foreign direct investment in the past year, a signal that the international companies are looking at the country.

Modi didn’t refer to China directly, but India is trying to capitalize on its rival’s rising production costs and deteriorating ties with the United States and European nations to become a replacement home for large multinationals.

Referring to border tensions with China in the Ladakh area, he said Indian forces had given a befitting response in the mountainous region where thousands of soldiers from the two countries remain in a tense standoff since May. India said 20 of its troops died in hand combat with Chinese troops on June 15.

“Whether it’s terrorism or expansionism, India is fighting the challenges bravely,” Modi said in apparent references to threats from neighbouring Pakistan and China.

Get more from the St. Catharines Standard in your inbox

Never miss the latest news from the St. Catharines Standard. Sign up for our email newsletters to get the day’s top stories, your favourite columnists, and much more in your inbox.

Sign Up Now

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

BoE's Haldane says UK economy on path to rapid recovery: Daily Mail op-ed – TheChronicleHerald.ca

Published

on


(Reuters) – The UK economy is on course for a rapid recovery from the coronavirus crisis as strong consumer spending has helped recoup nearly half the losses caused by the pandemic, Bank Of England chief economist Andy Haldane said in an op-ed in the Daily Mail on Saturday.

“Economic activity in the UK is not falling like a stone. In fact, it has now been rising for more than three months, sooner than anyone expected,” Haldane wrote.

He said while shops remain shuttered, people turned to online shopping and sales rose over 70%, leading retail spending levels to recover to pre-pandemic levels.

Businesses in the services and manufacturing sectors grew at the fastest rate in more than five years in July, according to a IHS Markit/CIPS survey released in early August.

Haldane, who voted against expanding BoE stimulus in June, said that the central bank will continue to support the economy until recovery is well under way.

Haldane said that GDP is expected to rise by over 20% in the second half of the year. By his estimates, the economy has been rising an average of about 1% per week.

“While that leaves activity well below pre-Covid levels, the UK has already recovered perhaps half of its losses,” the op-ed said.

Haldane said the recovery in jobs would take longer but the risks to jobs have receded as spending and business confidence had picked up.

Last week the BoE forecast it would take until the final quarter of 2021 for the economy to regain its previous size, and warned unemployment was likely to rise sharply.

The BoE, which cut interest rates to just 0.1% in March, added that it saw no immediate case to cut interest rates below zero.

(Reporting by Rebekah Mathew and Rama Venkat in Bengaluru; editing by Grant McCool)

Let’s block ads! (Why?)



Source link

Continue Reading

Trending