LONDON (Reuters) – Britain’s economy is unlikely to have a quick bounce back as it recovers from its coronavirus shutdown which could have wiped more than 30% off output last month, the head of the country’s budget forecasting office said on Sunday.
Robert Chote, chairman of the Office for Budget Responsibility (OBR), said April was probably the bottom of the crash as the government is now moving to gradually ease its lockdown restrictions.
“We know that the economy, probably at its worst last month, may have been a third or so smaller than it normally would have been, in terms of output of goods and services and people’s spending,” he told BBC television.
“But that should be the worst of it.”
Britain, like many other countries, has shut down much of its economy to slow the spread of COVID-19.
Last month, the OBR said Britain’s gross domestic product could plummet by 13% in 2020, its biggest collapse in more than 300 years.
Chote said a quick, V-shaped recovery included in that report was only meant to be an illustrative scenario to show the hit to the public finances.
“In practice I think you are likely not to see the economy bouncing back to where we would have expected it otherwise to be by the end of the year, on that assumption, but instead a rather slower recovery,” Chote said.
As well as the pace of the lifting of the lockdown, the speed of the recovery would depend on how cautious consumers remained and how companies adjust to changes in the economy such as more demand for online retailing and less for restaurants.
Chote said Britain would not necessarily have to return to severe public spending cuts to cope with the debt surge that will come from its response to the coronavirus crisis.
Key factors include how much permanent damage the economy suffers, the level of interest rates on public debt – which are currently rock-bottom – and how much the country wants to spend on health and other services.
“But a post financial crisis-style, extended period of austerity is not a done deal,” Chote said, adding tax increases were another option.
Prime Minister Boris Johnson has said he will not lead Britain into a new period of austerity after previous Conservative-led governments sought to fix the public finances by cutting spending in many areas of public services.
(Writing by William Schomberg; editing by Michael Holden and Jason Neely)
Canada's economy shrinks 8.2% in first quarter, worst showing since the financial crisis – Financial Post
Canada’s economy shrank the most since the 2008-09 financial crisis, marking the beginning of what’s expected to be the deepest contraction of the post-war era.
Gross domestic product dropped at an annualized 8.2 per cent in the first three months of the year, Statistics Canada said Friday in Ottawa. Economists had anticipated a 10 per cent decline. The agency also released preliminary estimates for April that show an 11 per cent plunge in output, versus the 7.2 per cent drop in March when coronavirus restrictions were first imposed halfway through the month.
As bad as the numbers are, the better-than-expected data suggest the country may be able to avoid the most dire scenarios, helped by a flood of government transfers into the economy.
“Overall, the economy has likely troughed at least for now, with businesses beginning to reopen,” Royce Mendes, an economist at Canadian Imperial Bank of Commerce, said in a report to investors. “Look for the economic data to begin showing signs of revival over the summer months, even if it only represents the low-hanging fruit of eased restrictions.”
The second quarter likely won’t be worse than the 40 per cent annualized decline that CIBC is forecasting, Mendes said.
According to Bank of Montreal’s Doug Porter, Canada’s first quarter contraction is right in the middle of the pack among Group of Seven countries, better than all three eurozone countries but worse than the U.S., Japan and the U.K.
“The new news here is that the figures were a little less dire than feared,” Porter said in a report.
The historic decline in the first half of 2020 has been anticipated. The focus is shifting to how quickly and to what extent the economy will recover. Most economists expect a slow recovery as long as consumers remain hesitant to resume normal activities, at least until a vaccine is available.
The Canadian dollar was little changed after the report, trading at C$1.3768 against the U.S. dollar at 9:12 a.m. in Toronto trading. Two-year government bond yields dropped 2 basis points to 0.29 per cent.
Friday’s report showed the downturn was broad-based, with household spending falling 9 per cent annualized, the most on record. The drop in consumption accounted for 5 percentage points of the 8.2 per cent annualized drop. Businesses scaling back inventories accounted for another 2 percentage points.
The pullback from the consumer was also evident in a surge in the savings rate to 6.1 per cent in the fourth quarter. That’s the highest since 2001.
Even though hundreds of thousands of Canadians lost jobs in the first quarter, household disposable income was up, reflecting an increase in government transfers. Canadians didn’t spend those transfers however, putting them toward savings.
Non-residential business investment came in much stronger than expected, recording just a 2.7 per cent annualized drop in the first quarter — a better performance than the previous three months when it dropped 4.8 per cent. There was little impact on housing investment, which was little changed in the first quarter.
Government spending was weaker, posting a 3.8 per cent annualized drop, the most since 2013, from school closures and curtailed government administration. Exports were also hit considerably in the first quarter, recording an 11.3 per cent annualized drop. But the impact of trade on growth was largely offset by a 10.7 per cent drop in imports.
Calm before the storm for Japan suicides as coronavirus ravages economy – National Post
TOKYO — The phones at the Tokyo suicide hotline start ringing as soon as it opens for its once-weekly overnight session. They don’t stop until the lone volunteer fielding calls from hundreds of people yearning to talk signs out early the next morning.
Both operating days and volunteer numbers at the volunteer-run Tokyo Befrienders call center have been cut to avoid coronavirus infection, but the desperate need remains.
“There are so many people who want to connect and talk to somebody, but the fact is we can’t answer all of them,” center director Machiko Nakayama told Reuters.
Health workers fear the pandemic’s economic shock will return Japan to 14 dark years from 1998 when more than 30,000 people took their lives annually. With the grim distinction of the highest suicide rate among G7 nations, Japan adopted legal and corporate changes that helped lower the toll to just over 20,000 last year.
Worried the current crisis will reverse that downward trend, frontline workers are urging the government to boost both fiscal aid and practical support.
“We need to take steps now, before the deaths begin,” said Hisao Sato, head of an NGO that provides counseling and economic advice in Akita, a northern prefecture long known for Japan’s worst suicide rate.
National suicides fell 20% year-on-year in April, the first month of the country’s soft lockdown, but experts said that was likely due to an internationally recognized phenomenon in which suicides decrease during crises, only to rise afterwards.
“It’s the quiet before the storm, but the clouds are upon us,” Sato said.
Prevention workers see echoes of 1998 when a sales tax hike and the Asian economic crisis first drove annual suicides above 30,000, then to a peak of almost 34,500 in 2003.
Economic circumstance is the second biggest reason for suicides, behind health, according to 2019 police data, which also shows that men are nearly three times more likely to kill themselves than women, and most are in the 40-60 age group.
The current crisis, which is forecast to shrink Japan’s economy 22.2 percent this quarter, is especially dangerous for cash-strapped small and medium-sized businesses for whom government subsidies might not arrive in time.
“It’s tough. A lot of people are really worried,” said Shinnosuke Hirose, chief executive of a small human resources firm that has lost nearly 90% of its business. “It’s like waiting at the execution grounds to see if they survive or not.”
A Health Ministry official in charge of suicide policy told Reuters his department planned to ask for more money from a $1.1 trillion central government stimulus package to help fund measures such as extra hotlines. The official, who declined to be named as he was not authorized to speak on the record, added there were limits to central government action and local efforts were crucial.
Some believe the steps taken in recent years to bring down the suicide rate will hold firm through the current crisis, but others are not so sure.
Kyoto University’s Resilience Research Unit has predicted 2,400 more suicides for each 1% rise in unemployment. If the virus subsides in a year, unemployment could peak at around 6% by March, lifting annual suicides to around 34,000, it estimated. If pandemic conditions persist for two years, a rise to 8% unemployment by March 2022 would see suicides spike over 39,000.
“Of course social support is important … but they won’t be able to ramp this up suddenly,” said unit director Satoshi Fujii. “Preventing bankruptcies will start helping immediately.”
At the Tokyo Befrienders call center, the phones continue to ring. The formerly nightly service now opens on Tuesdays only, with one volunteer a shift instead of four, although it plans to reinstate another day in June.
“Everyone has tried hard to get through lockdown, but now they’ll reflect and think ‘why was I doing it? What hope do I have?’” Nakayama said. “At that time I think a lot could choose death.” (Reporting by Elaine Lies; editing by Jane Wardell)
Nova Scotia's stimulus plan a good start in rebuilding devastated economy, economist says – TheChronicleHerald.ca
HALIFAX, N.S. —
A $230-million stimulus program expected to employ 2,000 Nova Scotians and rebuild important infrastructure assets is a needed emergency measure to rebuild an economy devastated by the COVID-19 crisis, but there’s plenty of pain still to come, warns a Halifax economist.
“For a province like Nova Scotia, $230 million of debt is significant but on the other hand we’re still focused on containing the economic pain that’s been caused by COVID-19 and I think that’s the first matter of focus,” said Melvin Cross, a Dalhousie University economics professor. “If you have 2,000 people otherwise unemployed and have them doing something that will add to the assets of the province then such a program is worth considering.”
Premier Stephen Mcneil unveiled the provincially funded plan on Wednesday when he announced the province’s economy would completely reopen on June 5. The provincial monies will pay for projects across the province, such as roads, bridges, school repairs and museum, courthouse, and hospital renovations. Statistics Canada reported earlier this month that 50,000 jobs were lost in Nova Scotia in April.
The professor said the program is a reasonable first response in addressing “the economic pain we see people experiencing.”
“Will we have more discussions about the details of this program and have some dissatisfaction with it, probably. That doesn’t mean the concept is unsound.”
Cross said there’s a possibility that the Bank of Canada would pony up cash to pay a portion of the stimulus program, much better than the alternative, he added.
“It would be unwise to increase tax rates in the economy that’s already lumbered with unemployment and businesses struggling to deal with the consequences of COVID19.”
Scotiabank released a report earlier this month predicting Nova Scotia could feel less economic pain caused by COVID-19 compared to other provinces.
The report said besides Saskatchewan, Nova Scotia is the only province likely to avoid record deficits in the 2021 fiscal year. Yet it predicts Nova Scotia will have a roughly $970-million deficit.
While the government has a key role to play in assisting businesses and rebuilding the economy there’s a limited pot of money available, said the professor. He likened the province’s predicament to fighting a raging fire with only a limited water source available.
“If we drained too much water out of the lake and you have to stop, well do you have the fire controlled yet?” said Cross. “Well, you say at what point do you decide it’s not appropriate to use water to put out the fire?”
The Chronicle Herald inquired with the province about the economic consequences of the stimulus plan, including whether it’s now in a deficit and if money has to be drawn from other government departments to pay for the program, but did not get answers to those questions.
Cross said as long as there’s no effective treatment for COVID-19, the province and country can expect to feel significant economic pain.
“We might get a bit of relief this summer If COVID-19 acts the way better understood flu viruses act but the epidemiologists tell us that we must be prepared to manage a second wave of COVID.”
Patrick Sullivan, CEO of the Halifax Chamber of Commerce, said he was pleased with the province’s decision to reopen those businesses closed during the lockdown, including restaurants, hairdressers and gyms. A $25-million Small Business Reopening and Support Grant was also announced on Wednesday for eligible businesses, nonprofits, charities and social enterprises to open safely. That amounts to $5,000 grants to businesses to purchase public health equipment necessary to reopen their business; money that’s badly needed and appreciated, said Sullivan.
“But there’s still concern restaurants will only be reopening at 50 per cent capacity and there will likely be reduced tourism this summer. We appreciate the need to operate safely because we don’t want this to happen again. “
Because of restrictions on international travel, tourism operators in the province face a daunting summer season. He’s encouraging Nova Scotians to choose a staycation to support the sector and advocating for the government to introduce a $2,000 accommodations tax credit to incentivize people to stay home.
He said businesses are in need of plenty more support but said there are still assistance programs available to small businesses through ACOA and Community Business Development Corporation. Sullivan said the federal Canada Emergency Commercial Rent Assistance Program, offering to cover 75 per cent of rent for small businesses, is flawed and has limited uptake largely because it’s optional for landlords. He said financial assistance should be made available to the tenant, not the landlord.
In the end, he couldn’t predict how many businesses in Halifax might be forced to close.
“I don’t know and don’t think anyone does right now I think the majority of businesses have tried to get their way through this to get a reopening day.”
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