Economy
Why Manitoba's middle-of-the-road economy cannot weather a pandemic on its own – CBC.ca
This story is part of The COVID Economy, a CBC News series looking at how the uncertainty of the coronavirus pandemic is affecting jobs, manufacturing and business in regions across Canada.
It’s become cliché to describe Manitoba’s economy as diverse, but that’s what is giving Manitobans solace as the province’s economy is put through the wringer in a global pandemic
An assorted blend of industries from agriculture to manufacturing and transportation have previously cushioned the middle province from the economic blows of provinces more vulnerable to the whims of single industries, such as oil.
And that economic track record has given officials the belief they can weather the financial toll of COVID-19.
Premier Brian Pallister has clung to economic forecasts carrying the same optimism, citing one model last week from RBC that predicted Manitoba’s gross domestic product would collapse — but not as badly as any other province.
“We are projected by most of the analysts, whether in banks or bond rating companies, to be the province that is best positioned to come back from this pandemic, and we are going to make that happen,” Pallister said on Tuesday.
Forecasters not confident
One economist behind the RBC forecast, however, suggests that provincial rankings are nearly meaningless.
“I think we’re starting to split hairs here,” said senior economist Robert Hogue, whose report pegs Manitoba’s GDP as dropping 3.7 per cent this year, compared to a 1.1 per cent increase in 2019. Still, he projects Manitoba’s economy will perform better relative to other provinces due to its diversification.
Hogue said the grim picture demonstrates how quickly the economy collapsed in the month since officials urged isolation to quell the spread of COVID-19.
All non-essential businesses have been closed for three weeks and counting, while 60,000 people are believed to have filed for employment insurance, finance minister Scott Fielding said. The province said in a background document last week 26.7 per cent of the labour market is either temporarily laid off or unemployed.
The question now is whether Manitoba’s previously steady-as-she-goes economy can withstand an economic shock more unsettling than any downturn since the Great Depression.
It can in the short term, says University of Winnipeg economics professor Phil Cyrenne, while the province has a higher proportion of employees in goods-producing businesses and the public sector.
“But in the long-term, you need to have a vibrant private sector.”
Manitoba’s economy began to slow down in mid-March, shortly after the first confirmed case of COVID-19 on March 12.
Read other stories in the series:
Buoyed by lower case numbers than less populated provinces like Saskatchewan and Nova Scotia, Pallister says he wants to be the first province to safely reopen the economy.
But the toll of the shutdown will be significant even if it is short, Cyrenne said.
He wonders if private businesses, especially in the battered restaurant and hospitality industries, can survive, and worries whether civil servants will lose work as an austerity-minded province teases layoffs.
Have-not province wants Ottawa’s aid
And he questions if a have-not province like Manitoba will face shrinking transfer payments from the federal government. Cyrenne mused Ottawa may cut transfers, the way it did in the 1990s, to control spiralling costs.
“That whole system, I think, is going to be in jeopardy — or at least there’s going to be lots of strains on it going forward.”
The Progressive Conservative government under Pallister spent its initial four years in government striving to whittle down its deficit from $850 million to an estimated $220 million by the end of this fiscal year.
It has pushed austerity during the pandemic, as well, relying on the federal government to provide financial aid for struggling individuals and businesses, while calling on provincial departments and public-funded bodies to cut non-essential costs.
The province is now expecting a year-end deficit as high as $5 billion due to a combination of soaring health-care costs and slumping revenues amid the pandemic.
Stephen Dodds, another economist from the University of Winnipeg, said a diverse economy alone doesn’t make Manitoba immune to financial woes.
“We’re going to need support from different levels of government, specifically the federal government, to allow us to do the borrowing we need to do to support our public services and get us through this crisis in the short term,” he said.
The province, though, has been reluctant to borrow, with Pallister saying on Monday, “We can’t just borrow our way out of this mess.”
His government has threatened layoffs if Ottawa doesn’t agree to let civil servants on reduced hours collect employment insurance. So far, the federal government isn’t willing to pick up that tab.
“I think Manitoba does face some pretty serious kind of short-term fiscal pressures,” Dodds said.
The Conference Board of Canada, which forecasts Manitoba’s economy will contract by 3.9 per cent this year, attributes the province’s economy downgrade, in part, to declines in transportation equipment manufacturing.
As one example, Dodds referenced bus manufacturer NFI Group Inc. permanently laying off 300 employees and temporarily halting production at its facilities, leaving at least hundreds more people without work for the time being.
Other big Manitoba employers have cut staff: Winnipeg-based Dufresne Furniture and Appliances has temporarily laid off 1,000 employees across several provinces, and Palliser Furniture let go of 500 Winnipeg staff in the short-term.
“Whether you serve your domestic market or an international market, we’ve seen demand really drop off a cliff,” said Conference Board of Canada economist Alicia Macdonald.
Ron Koslowsky, vice-president of the Manitoba division of the Canadian Manufacturers and Exporters, said the manufacturing sector is “surprisingly still holding its own.”
Food production is booming, and dozens of manufacturers have pivoted to making personal protective equipment for the health care field, he said, but depressed demand for transport and aerospace manufacturing is unmistakable.
“There’s no question that some [companies] will be altered,” Koslowsky said. “Some may not be around, although I don’t think they’ll be that many, unless things really tank.”
Manitoba Finance Minister Scott Fielding said he’s encouraged the province is moving toward loosening business restrictions after repeated days of few, or no, new cases of COVID-19.
It doesn’t mean the recovery, or the road to get there, will be painless, he said.
“Listen, I don’t want to sugar-coat this and say somehow this is going to be easy for anyone,” Fielding said in an interview.
“When you have the amount of people, the businesses that are completely shut down or partially shut down, the unemployment rate … it’s going to be some tough times for Manitobans, and really all Canadians,” he said.
Fielding also mentioned Manitoba’s diversified economy, and his hope in a financial system that has evaded the economic busts, but also the booms.
|
|
When Moscow resident Zoya, 62, was planning a trip to Italy to visit her daughter last August, she saw the perfect opportunity to buy the Apple Watch she had long dreamed of owning.
Officially, Apple does not sell its products in Russia.
The California-based tech giant was one of the first companies to announce it would exit the country in response to Russian President Vladimir Putin’s full-scale invasion of Ukraine on February 24, 2022.
But the week before her trip, Zoya made a surprise discovery while browsing Yandex.Market, one of several Russian answers to Amazon, where she regularly shops.
Not only was the Apple Watch available for sale on the website, it was cheaper than in Italy.
Zoya bought the watch without a moment’s delay.
The serial code on the watch that was delivered to her home confirmed that it was manufactured by Apple in 2022 and intended for sale in the United States.
“In the store, they explained to me that these are genuine Apple products entering Russia through parallel imports,” Zoya, who asked to be only referred to by her first name, told Al Jazeera.
“I thought it was much easier to buy online than searching for a store in an unfamiliar country.”
Nearly 1,400 companies, including many of the most internationally recognisable brands, have since February 2022 announced that they would cease or dial back their operations in Russia in protest of Moscow’s military aggression against Ukraine.
But two years after the invasion, many of these companies’ products are still widely sold in Russia, in many cases in violation of Western-led sanctions, a months-long investigation by Al Jazeera has found.
Aided by the Russian government’s legalisation of parallel imports, Russian businesses have established a network of alternative supply chains to import restricted goods through third countries.
The companies that make the products have been either unwilling or unable to clamp down on these unofficial distribution networks.
The ‘poor borrower’ narrative rules in media coverage of the Bank of Canada and high interest rates, and that’s appropriate.
A lot of people have been financially slammed by the rate hikes of the past couple of years, which have made it much more expensive to carry a mortgage, lines of credit and other borrowing. The latest from the Bank of Canada suggests rate cuts will come as soon as this summer, which on the whole would be a welcome development. It’s not just borrowers who need relief – the boarder economy has slowed to a crawl because of high borrowing costs.
But high rates are also a big win for some people. Specifically, those who have little or no debt and who have a significant amount of money sitting in savings products and guaranteed investment certificates. The country’s most well-off people, in other words.
Lower rates will mean diminished returns for savers and less interest paid by borrowers. It’s a stretch to say lower rates will improve financial inequality, but they do add a little more fairness to our financial system.
Wealth inequality is often presented as the chasm between well-off people able to pay for houses, vehicles, trips and high-end restaurant meals and those who are driving record use of food banks and living in tent cities. High interest rates and inflation have given us more nuance in wealth inequality. People fortunate enough to have bought houses in recent years are staggering as they try to manage mortgage payments that have risen by hundreds of dollars a month. You can see their struggles in rising numbers of late payments and debt defaults.
Rates are expected to fall in a measured, gradual way, which means their impact on financial inequality won’t be an instant gamechanger. But if the Bank of Canada cuts 0.25 of a percentage point off the overnight rate in June and again in July, many borrowers will start noticing how much less interest they’re paying, and savers will find themselves earning less.
Subscribe to Carrick on Money
Are you reading this newsletter on the web or did someone forward the e-mail version to you? If so, you can sign up for Carrick on Money here.
Rob’s personal finance reading list
A look at two strategies for paying off debt – the debt avalanche and the debt snowball. I’ll go with the avalanche.
How not to ruin your kitchen countertop
Anyone who has renovated a kitchen lately knows how expensive stone countertops can be. Look after yours by protecting it from a few common kitchen items.
What you need to know about stock market corrections
A helpful explanation of stock market corrections. It seems an opportune time to look at corrections, given how volatile stocks have been lately. Like scouts, investors should always be prepared.
Food inflation requires more careful grocery shopping. Here’s a roundup of food products – cookies, snacks, ice cream – that don’t taste as good as they used to. Food companies have always adjusted their recipes from time to time. Is this happening more because of inflation’s impact on raw material prices? A U.S. list – most products are available are familiar to Canadians, too.
Ask Rob
Q: I have Tangerine children’s accounts for my kids. Can you suggest a better alternative?
A: The rate on the Tangerine children’s account is 0.8 per cent, which actually compares well to the big banks and their comparable accounts. For kids aged 13 and up, check out something new called the JA Money Card.
Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.
Tools and guides
A comprehensive guide on how to build a good credit score.
In the social sphere
Social Media: An offbeat way of fighting high food costs
Watch: Is now the hardest time ever to buy a home?
Money-Free Zone: Singer-songwriter Maggie Rogers has a new album called Don’t Forget Me and it’s generating some buzz because it’s a great listen. Smooth vocals and a laid back countryish vibe that hits a faster pace on one of my favourite cuts, Drunk.
More PF from The Globe
– He keeps ‘a few thousand in crisp new bills’ at home – is that a good idea?
– The pension pivot: Employers recognizing that workers need help with debt as much as retirement
– Her bond ETF is ‘a dud and not promising at all’ – should she sell?
– Despite high fees, Canadians remain perplexingly loyal to mutual funds. Here’s why
More Rob Carrick and money coverage
Subscribe to Stress Test on Apple podcasts or Spotify. For more money stories, follow me on Instagram and Twitter, and join the discussion on my Facebook page. Millennial readers, join our Gen Y Money Facebook group.
Even more coverage from Rob Carrick:
- 🎧 Catch up on Stress Test: Why millennials and Gen Z are Alberta-bound for a more affordable life • Rising interest rates brought pain for new homeowners – and opportunity for house hunters • Why more Canadians are choosing to be childfree or delay parenthood • Love in the time of inflation: How to manage rising costs when dating • You’re not bad at money – you’re suffering from money shame • Retirement might look different for Gen Z and millennials. Here’s how to plan for it • Recession-beating tips for the job market, housing, investing and the cost of life • Is the middle class dead for millennials and Gen Z?
- ✔️ The housing file: A house isn’t special. Get your head straight about the reality of home ownership • The good, the sad and the unaffordable: Saving for a home downpayment in Canada’s big cities • Property taxes are popping in some cities – how worried should you be about other tax hikes? • Our other real-estate problem – people have too much wealth tied up in houses • Borrowers and savers, here’s how to time the eventual rollback of interest rates
- 📈 Investing: Canada’s top digital broker is TD Direct Investing, with an assist from the TD Easy Trade app • 2023 Globe and Mail ETF buyer’s guide part one: Canadian equity ETFs • For the ultimate in cheap investing, check out the Freedom .08 ETF Portfolio • Yes, there is risk in Canadian bank deposits for the unwary and complacent • CDIC covers bank deposits, but who protects your investments if your broker goes bust? • Answers to your questions about the low-risk ETF paying almost 5% • Happy fifth birthday to one of the all-time best investing products for everyday people • An investing strategy that wins cleanly over the long term by outperforming in bad years like 2022
- 💰 Your money: Mortgage holders, savers and GIC investors, it’s time to change your thinking on interest rates • How much debt is each generation of Canadians carrying, and how do you compare? • For the sake of their financial futures, young people should leave Toronto and Vancouver • This practical new spin on a savings account might just peel you away from your big bank • Rental fraud grows amid rise in fake, falsified tenant applications • Are Canadians worse off financially now than in the 1980s? • From groceries to auto loans, here’s how much more it costs to live right now • When saving for retirement, should you change your asset mix over the course of your career? • Do retirement income needs always rise alongside inflation? Not necessarily • When the bank suggests you lock in your variable rate mortgage, it has an angle
What is a halal mortgage? How interest-free home financing works in Canada – Global News
Amid concerns over 'collateral damage' Trudeau, Freeland defend capital gains tax change – CTV News
Politics Briefing: Saskatchewan residents to get carbon rebates despite province's opposition to pricing program – The Globe and Mail
Silver investment demand jumped 12% in 2019
12 Bizarre Things People Did Just To Make Social Media Content
Global Media Markets, 2015-2020, 2020-2025F, 2030F – TV and Radio Broadcasting, Film and Music, Information Services, Web Content, Search Portals And Social Media, Print Media, & Cable – GlobeNewswire
-
Health5 hours agoRemnants of bird flu virus found in pasteurized milk, FDA says
-
Art11 hours ago
Mayor's youth advisory council seeks submissions for art gala – SooToday
-
News17 hours ago
Some Canadians will be digging out of 25+ cm of snow by Friday – The Weather Network
-
Science19 hours ago
"Hi, It's Me": NASA's Voyager 1 Phones Home From 15 Billion Miles Away – NDTV
-
Media16 hours ago
Jon Stewart Slams the Media for Coverage of Trump Trial – The New York Times
-
Art23 hours ago
Made Right Here: Woodworking art – CTV News Kitchener
-
Health9 hours ago
Bird flu virus found in grocery milk as officials say supply still safe
-
Investment10 hours ago
Taxes should not wag the tail of the investment dog, but that’s what Trudeau wants
