Canada is only now seeing the tip of the iceberg known as COVID-19, but it’s already clear that its economic impact will set records. Economists say the outlook for jobs and the economy may be bleak, but the depth and suddenness of the decline may provide hope for a quick rebound.
The black swan has landed.
The novel coronavirus pandemic is well underway worldwide, but it wasn’t until this month that Canadians started coming to grips with the economic pain it can bring, in addition to its heavy human toll.
Economists are struggling to come up with best guesses as to what might be coming. There’s still a lot that they — and we — don’t know. But the picture they’re painting for Canada’s financial future is already bleak.
GDP could significantly contract
At a minimum, the Conference Board of Canada is assuming that most industries across the country will be essentially shut down for at least six weeks.
If they take an optimistic view and assume that’s enough to contain the outbreak, even that short term pain will make a major dent in the country’s total output, a metric known as the Gross Domestic Product, or GDP.
Should this relatively mild scenario come to pass, Canada’s economy would eke out a tiny 0.3 per cent growth for 2020 as a whole as things ramp up in the latter half of the year. That’s far from booming — Canada’s economy grew by 1.6 per cent last year, for example — but it’s preferable to other alternatives.
Under a more pessimistic scenario, the board sees lockdowns and quarantines stretching for up to six months, until August. If that happens, the GDP hit would be massive — an annualized contraction rate of 9.6 per cent in the second quarter, which is worse than what we saw in the financial crisis of 2008 and 2009. The economy shrank at an annual pace of 8.7 per cent at its worst stage, in early 2009 before rebounding starting in the spring.
“Brace yourself for some horrible data in the near-term, as there’s little doubt that the second quarter will produce some painful and likely historic figures on … economic contraction,” the economics team at TD Bank said in a note to investors.
Joblessness fears escalate
Economists tend to focus on GDP in their modelling, but when you ask Canadian workers how they think the economy is doing, they tend to focus on whether they have jobs that pay the bills.
It already looks like the recession caused by COVID-19 will be one for the record books when it comes to joblessness.
In any given week, Canada gets about 45,000 claims for jobless benefits, according to the economics team at TD Bank.
But the numbers f