Economy
The virus that shut down the world: Economic meltdown – UN News
The early warning signs
UNCTAD/Jan Hoffmann
UNCTAD has estimated global economic losses of $1 trillion in 2020.
Even before the virus had officially been declared a pandemic, it was clear that the shutdowns, travel bans and other restrictions on movement would be serious.
Back in March, the UN trade agency, UNCTAD, was forecasting that around $1 trillion would be lost to the global economy over the year, and the International Monetary Fund (IMF) and World Bank arranged for a multi-billion dollar injection of UN-back global funds to be made available to low-income and emerging markets.
Despite this assistance, the outlook, especially for some six billion people living in developing countries, was grim, with UNCTAD warning of a “looming financial tsunami.
Young and lower-skilled workers bear the brunt
ILO/Feri Latief
A woman follows health protocols by wearing a face mask at work in a restaurant in Indonesia.
In May, the UN Department of Economic and Social Affairs (DESA) forecast that the global economy would shrink by almost 3.2 per cent in 2020, equivalent to some
$8.5 trillion in losses, and the International Labour Organisation (ILO) warned that nearly half of the global workforce could see their livelihoods destroyed due to the continued decline in working hours brought on by lockdowns. The following month, the World Bank confirmed that the world was in the middle of the worst recession since World War Two.
Lower-skilled workers were hard hit, in wealthier as well as developing economies. Mass lay-offs took place in the service sector, particularly industries that involve personal interactions such as tourism, retail, leisure and hospitality, recreation and transportation services. The ILO followed up in December, with a report showing that wage increases are slowing, or even reversing, hitting women workers and the low-paid hardest: this trend is expected to continue even with the rollout of vaccines. Young people were also particularly affected: more than one in six had stopped working by May and those who were still in work saw their hours cut by almost 23 per cent.
Is universal basic income the answer?
World Bank/Jonathan Ernst
Providing a universal basic income could be a central part of fiscal stimulus packages.
Confronted by this flood of negative data, the idea of universal basic income (where governments give a minimum sum of money to all citizens, regardless of work status or income) began to gain traction within the UN.
In May, A report by the Economic Commission for Latin America and the Caribbean (ECLAC) proposed that governments ensure immediate temporary cash transfers to help millions of people struggling to meet basic needs, as the massive fallout from COVID-19 rippled across the region’s economies.
When UN News interviewed a senior official at UNDP, Kanni Wignaraja, she said that the pandemic had upended economies so severely, that bolder ideas were now needed.
“At the UN, we’re saying that, if there isn’t a minimum income floor to fall back on when this kind of massive shock hits, people literally have no options. Without the means to sustain themselves, they are far more likely to succumb to hunger or other diseases, well before COVID-19 gets to them. This is why, for UNDP, it is so essential to bring back a conversation about universal basic income, and to make it a central part of the fiscal stimulus packages that countries are planning for”.
By Summer, a UN Development Programme (UNDP) report was recommending a temporary universal basic income, for the world’s poorest people, as a way to slow the surge in COVID-19 and enable close to three billion people to stay at home. The study showed that workers who lack any kind of social safety net have no choice but to venture outdoors, putting themselves and their families at risk.
Contacted in December by UN News, UNDP elaborated on some of the way that temporary basic income has helped to slow the spread of COVID-19, and provide a safety net for people in need.
For example, this year saw several UN agencies working together to help the Government of Cambodia roll out their first digital cash transfer system for people living below the poverty line, a system which is, says UNDP, now the backbone of the Government’s COVID-19 cash transfer program for the poor. The Governments of Bangladesh, Indonesia, Malaysia, the Philippines, Viet Nam and other countries have introduced similar cash transfer systems.
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Toronto stock exchange index rose on Friday, as energy stocks gained on higher crude prices and upbeat economic data bolstered optimism over an economic rebound.
* The energy sector climbed 0.8% as U.S. crude prices were up 0.2% a barrel, while Brent crude was unchanged. [O/R]
* At 09:36 a.m. ET (13:36 GMT), the Toronto Stock Exchange’s S&P/TSX composite index was up 39.12 points, or 0.2%, at 20,088.59.
* Statistics Canada said the country’s industries ran at 81.7% of capacity in the first quarter of 2021, up from a upwardly revised 79.7% in the fourth quarter of 2020, while the nation’s net worth jumped by a record 7.7% in the first quarter to C$15.0 trillion ($12.40 trillion).
* The financials sector gained 0.1%. The industrials sector rose 0.4%.
* The materials sector, which includes precious and base metals miners and fertilizer companies, added 0.2% as gold futures fell 0.5% to $1,885.4 an ounce [GOL/]
* On the TSX, 114 issues were higher, while 102 issues declined for a 1.12-to-1 ratio favouring gainers, with 9.72 million shares traded.
* The largest percentage gainers on the TSX were miners Hudbay Minerals Inc, up 3.8%, and First Quantum Minerals Ltd, up 3.7%.
* Enghouse Systems Limited fell 7.6%, the most on the TSX, after the software provider missed second-quarter estimates and the second biggest decliner was real estate investment trust NorthWest Healthcare Properties, down 1.3%.
* The most heavily traded shares by volume were those of Hut 8 Mining Corp, Canadian Natural Resources Limited, and NorthWest Healthcare Properties.
* The TSX posted 16 new 52-week highs and one new low.
* Across all Canadian issues there were 76 new 52-week highs and 2 new lows, with total volume of 22.41 million shares.
(Reporting by Amal S in Bengaluru; Editing by Shailesh Kuber)
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The Canadian dollar weakened against its U.S. counterpart on Friday, extending a weekly decline, as the greenback broadly rose and domestic data showed industries operating at a greater share of their capacity in the first quarter.
The loonie was trading 0.3% lower at 1.2135 to the greenback, or 82.41 U.S. cents, after touching its weakest intraday level since May 27 at 1.2140. For the week, it was on track to fall 0.5%.
The U.S. dollar rallied against a basket of major currencies as U.S. Treasury yields stabilized. Yields fell on Thursday as the market deemed a spike in inflation to be transitory.
Canadian industries ran at 81.7% of capacity in the first quarter of 2021, up from an upwardly revised 79.7% in the fourth quarter of 2020, Statistics Canada said.
“The report tracks the impact of the boom in the housing and resource extraction industries as the economy reflates,” said Ryan Brecht, a senior economist at Action Economics.
On Wednesday, the Bank of Canada said there remains considerable excess capacity in the Canadian economy.
Still, the BoC’s more hawkish stance since April and soaring commodity prices have helped boost the Canadian dollar, with the currency up nearly 5% against the U.S. dollar since the start of the year.
A stronger loonie is usually seen hurting exporters, but the nature of the global economic recovery could help companies pass on their higher costs from the currency to customers, leaving exporters in less pain than in previous cycles.
Oil, one of Canada‘s major exports, rose on Friday to a fresh multi-year high at $70.80 a barrel.
Canadian government bond yields were mixed across the curve, with the 10-year up 1.2 basis points at 1.383%. Earlier in the day, it touched its lowest since March 3 at 1.368%.
(Reporting by Fergal Smith; editing by Jonathan Oatis)
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Homeownership can be very exciting, but it isn’t always the best thing for everyone. Before you decide to buy a home, make sure you carefully consider the costs.
According to Canada Mortgage and Housing Corporation (CMHC), your monthly housing costs should not be more than about 35% of your gross monthly income. This includes costs such as mortgage payments and utilities.
Your entire monthly debt load should not be more than 42% of your gross monthly income. This includes your mortgage payments and all your other debts.
Use CMHC’s step-by-step guide to help you decide if homeownership is right for you.
Saving for your home
To buy a home, you need a down payment. You also need money to pay for the upfront costs.
Make saving part of your monthly budget. Most employers deposit your pay directly into your chequing or savings account. Increase your chances of reaching your savings goals by setting up automatic transfers to a savings account each pay cheque.
Saving with a Tax-Free Savings Account (TFSA)
A TFSA is an account that lets you save or invest your money tax-free. You won’t pay tax on money you withdraw from your TFSA. You can also use your TFSA to help you buy a home.
Saving with a Registered Retirement Savings Plan (RRSP)
An RRSP is an account that allows you to save money for your retirement. You don’t pay taxes on your savings until you withdraw money from the RRSP.
The Home Buyers’ Plan (HBP)
If you’re a first-time homebuyer, the HBP allows you to withdraw up to $35,000 from your RRSPs tax-free to put toward buying your first home.
Learn more on how to participate in the Home Buyers’ Plan.
The First-Time Home Buyer Incentive
This incentive offers 5% or 10% of your home’s purchase price to put towards a down payment.
Learn more about the First-Time Home Buyer Incentive.
Using savings and investment
If you plan to buy a home in the near future, focus on building your savings. You’ll want to keep your money protected and easily accessible.
Short-term savings and investment options may include:
- savings accounts
- short-term guaranteed investment certificates (GIC)
- low-risk mutual funds
Ask your financial institution or advisor about the short-term investments they offer and how they work.
Paying for your home
Most people need to borrow money to buy a home. You also need to put some of your own money into the purchase.
Down payment
When you buy a home, you must put a certain amount of money toward the purchase upfront. This is called a down payment. Your mortgage loan will cover the rest of the price.
Find out how much of a down payment you need to purchase a home.
Mortgage process
A mortgage is likely the biggest loan you get in your lifetime. It’s important that you understand the process.
Check your credit report before you apply for a mortgage
A potential lender considers your credit history before they decide whether or not to approve your mortgage application.
Before you start shopping around for a mortgage:
Shop around for a mortgage
Lenders may have different interest rates and conditions for similar mortgages. Talk to several lenders to find the best mortgage for your needs.
You can get a mortgage from:
Mortgage lenders – These institutions lend money directly to you. Explore the different types of lenders that are available, including banks and credit unions.
Mortgage brokers – They don’t lend money directly to you. Mortgage brokers arrange transactions by finding a lender for you. Since brokers have access to many lenders, they may give you a wider range of mortgages to choose from. The lender pays a commission to the mortgage brokers, so there’s no cost to you.
Find a local certified mortgage broker with Mortgage Professionals Canada.
Find out about getting pre-approved and qualified for a mortgage.
Get the mortgage that meets your needs
Mortgages have different features to meet different needs. It’s important that you understand the options and features.
Questions you should ask yourself include:
- do you want a mortgage with a fixed interest rate or one that can rise or fall
- how long of a term do you want
- how often would you like to make payments toward your mortgage
Find a mortgage that is right for you.
Mortgage loan insurance
If your down payment is less than 20% of your home’s price, you need to purchase mortgage loan insurance. In some cases, you may need to get mortgage loan insurance even if you have a 20% down payment.
Mortgage loan insurance protects the mortgage lender in case you’re not able to make your mortgage payments. It does not protect you. Mortgage loan insurance is also sometimes called mortgage default insurance.
Optional mortgage life, critical illness, disability and employment insurance
Your lender may ask whether you would like to purchase life, critical illness, disability and employment insurance.
These products that can help make mortgage payments, or can help pay off the remainder owing on your mortgage, if you:
- lose your job
- become injured or disabled
- become critically ill
- die
There are important exemptions for each of these insurance products. An exemption is something not covered by your insurance policy. Read the insurance certificate before you apply to understand what this insurance covers.
These insurance products are optional. You don’t need to purchase this insurance coverage for your mortgage to be approved. You must clearly agree to sign up for this insurance before the lender charges you for it.
Tax credits for homebuyers
The Government of Canada offers two tax credits for specific types of homebuyers. Your provincial or territorial government may also offer other home-buying incentives.
The Home buyers’ amount
You get access to this tax credit when you purchase your first home and submit a tax return. It’s an effective means of offsetting some of the upfront costs associated with buying a home. Eligible homebuyers may receive a tax credit of up to $750.
Find out if you’re eligible for the Home buyers’amount.
GST/HST housing rebates
Generally speaking, sales of new homes are subject to the GST/HST. You may qualify for a rebate for some of the tax you paid.
Learn more about the GST/HST housing rebates that may be available to you.
Moving expenses
You may move into a new home to work or run a business in a new location. You can deduct eligible moving expenses from the employment or self-employment income that you earn in the new location.
Home buying costs
When you buy a home, you have to pay for upfront costs in addition to your mortgage. These are called closing costs. You can expect to spend between 1.5% and 4% of the home’s purchase price on closing costs. You usually pay these costs by the time the sale is completed or “closes”.
Legal costs
You have to pay legal fees on your closing day. This is the day that your home purchase is complete. These fees are usually range between $400 to $2,500 but will vary depending on your lawyer’s or notary’s rates.
A lawyer or notary can help protect your legal interests. They make sure that the home you want to buy does not have a lien against it. A lien is a legal claim over another person’s property that someone files to ensure a debt gets paid.
A lawyer or notary reviews all contracts before you sign them. They also review your offer or agreement to purchase.
Home insurance
You must have home insurance in place as a condition of getting a mortgage.
Home insurance can help protect your home and its contents. It typically covers the inside and outside of your home in case of theft, loss or damage.
Learn more about how home insurance works and the different types that are available.
Land registration
Before the sale closes, you’re required to pay to register your property’s title under your name. This may be called a land transfer tax, a deed registration fee, a tariff, or a property transfer tax.
The cost is a percentage of the home’s purchase price. For example, if your land transfer tax is 1.5% and your home cost $300,000, you pay $4,500.
Adjustment costs
The seller of the home you’re buying may be entitled to adjustments. For example, the seller may have already paid the property tax on the home past the purchase closing date. If that’s the case, the seller receives a credit on the closing date. You must then pay this credit amount to cover the money already paid by the seller.
New build GST/HST
Generally, if you buy a new build home, you pay GST or HST. Some builders include the HST in their sale price while others don’t. Make sure to check. Otherwise, you have to pay this cost upfront on closing day.
Other closing costs
Other closing costs may include:
- interest adjustments (period between your purchase date and your first mortgage payment)
- Certificate of Location cost
- estoppel certificate (for condominium units)
- township or municipal levies (may apply to new homes in subdivisions)
- mortgage default insurance premium (if paying premium up front instead of adding it to mortgage loan)
- provincial sales tax on premiums for mortgage default insurance (applicable in some provinces)
Other home-buying costs
Other costs you may need to budget for include:
Home appraisal
Mortgage lenders may ask you to have an appraisal done as part of the mortgage approval process.
An appraiser provides a professional opinion about the market value of the home you want to buy. An appraisal fee is generally between $350 and $500.
Home inspection
An inspector provides a comprehensive visual inspection of a home’s overall structure, major systems and components such as:
- electrical and plumbing systems
- the foundation
- the roof
CMHC recommends that you include a home inspection as a condition when you make an offer.
Use tips from the Office of Consumer Affairs to find an inspector and learn about home inspections.
Moving costs
Before moving in, you may also have to pay for:
- moving costs
- storage costs
- real estate costs for selling your home (if applicable)
- redirecting mail
Find out what to consider when choosing a moving company, and how to plan for moving day costs.
Once you move in, you may immediately face other costs, including:
- utility hook-up fees
- basic furniture and appliances
- painting and cleaning
- water tests
- septic tank tests (if applicable)
Use this home purchase cost estimate form to estimate your home-buying costs.
Working with a real estate agent
Using a realtor is optional. A realtor typically searches for homes, negotiates a purchase price, fills out and file paperwork, and more.
The seller pays the realtor’s fees when you buy a home.
Learn more about a realtor’s involvement in the home-buying process.
Home buying and newcomers to Canada
CMHC has a guide with comprehensive information on housing for newcomers.
Consult Buying Your First Home in Canada: What newcomers need to know.
Buying a condominium
Condominiums, or condos, are shared properties that contain individual housing units. Each unit has its own owner. Owners share the common areas outside of the unit such as the lobby and parking lot.
There are pros and cons to owning a condo. For example, if you buy a condo, you pay monthly condo fees. However, you may like the idea of sharing the building maintenance costs with the other unit owners.
Learn about condo fees and other ongoing costs of maintaining a home.
Use this Condominium Buyers Guide for tips on what to consider before buying.
Buying to rent
You can buy a property with the intention of renting it out. Keep in mind that you have to declare your rental income at tax time each year.
Find out how to calculate your rental income and which expenses you can deduct.
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