Last week the federal government provided a fiscal snapshot revealing the extent of pandemic-related damage on the Canadian economy — and the damage was apparent in various areas.
According to Canadian Black Book’s latest COVID-19 update, the expectation is that there will be two million Canadians unemployed until the end of 2021 and growth will be slow during this period. CBB said the federal government is anticipating an eventual drop in the unemployment rate, which will first reach 9.8% in 2020 before declining to 7.8% next year.
“The $80-billion Canada Emergency Response Benefit (CERB) has paid out $53.5 billion in benefits, as of late June,” said CBB in its report. “It has covered Canadians’ estimated $44.6 billion in lost labour income through the first half of the year. The government deficit is now expected to be a historic high of $343.2 billion.”
The cost of the pandemic has reached $231.9 billion in direct spending — a deficit comparable to those seen during World War II. CBB said a full recovery does not seem possible, at least not until there is an effective vaccine or treatment that is both widely available and deployed to the population.
“The federal government is concerned that the COVID-19 situation could worsen if two scenarios come into reality,” said CBB. “If prolonged shutdowns or restrictions remain in place, a return to normal activity for the economy will be volatile and slower than hoped for.”
Such a situation would result in a more significant decline in GDP than anticipated. However, if Canada is impacted by a second wave of the virus during the annual flu season — the lockdowns would likely return or remain and lead to a “deeper and longer-lasting negative impact on the economy,” which is how the Finance Department describes the situation.
The outlook connects with CBB’s Most Likely Scenario and Severe Recessions Scenario, in terms of its residual value forecast outlook. They are optimistic that Canada will be dealing with the Most Likely Scenario, due to the current COVID-19 situation. But if the country’s ability to manage the virus is not (or no longer) effective, then Canadians can expect to be dealing with a Severe Recession Scenario.
