Economy during COVID-19 in Canada

Ashraful Kabir

The whole Canada is busy to forecast for the upcoming trends of the Recession and Economy behavior – It’s basically depends on how long these COVID-19 measures are in place? It probably will be a V – shaped recovery if the shutdown is weeks or a month because people are very strong,” But if it stays shut down for six months — well, that’s a different ball game.”

So, Let’s discuss the scenario in detail. As I said, it’s such a scenario which economists are struggling to model and understand. “The reopening of the economy will not depend on traditional economic drivers like demand and supply, but on the evolution of the health emergency. As long as COVID-19 case counts are rising, this economy is not going to reopen and people will not be rehired. For the first time we are running economic analysis based off of health forecasts, of which we have very limited visibility and experience. According to National Post in their recent article states, The premiers of Canada’s two largest provinces announced plans to begin reopening their societies in the wake of COVID-19, but both cautioned it will be a long time until things get back to normal.

Quebec Premier François Legault said some elementary schools would start reopening on May 11 and on Tuesday he is due to outline a plan for businesses. Ontario Premier Doug Ford released a roadmap to reopening his province but it was short on specifics.

Even with the limited steps toward lifting restrictions, nobody should expect to attend large sports games or concerts anytime soon, and it’s unlikely high schools and universities will be hosting students before the fall.

“This is a roadmap, it’s not a calendar,” Ford said. In other words, “The framework is about how we’re reopening, not when we’re reopening. Let me be crystal clear: As long as this virus remains a threat to Ontario, we will continue to take every precaution necessary.”

Which means few potential lingering effects of COVID – 19 will be on the Canadian Economy. Let’s discuss one by one and today will be talking about:

Debt / Loan backlog
While the decision of emergency interest rate cuts by Bank of Canada, income support and mortgage deferment plans should help heavily indebted Canadians from hitting rock bottom, it is inevitable that many will go further into the debt hole. There are reports that credit card companies are already worried as consumers are using plastic to replace lost income. All that raises questions about whether, once the illness is past, consumers can resume their role as debt-fueled machines of the North American economy. Meanwhile, governments are accumulating massive new debts of their own. Highly leveraged businesses also face stress.

Think in other way, as many of business and individuals are deferring their Rent / Mortgage / Lease payment as well as other Service and Credit bills, which are going to be piled up at the end of this pandemic situation and burdens will be overwhelmed and disastrous as also the household debt overhang will make it harder for Canada’s economy to rebound.

Although CERB and other Financial Tools are pumping the money in the economy, basically those are to fill the gap for the lost income due to Job/Business Loss during COVID – 19 situation. But people are now scared to spend all the pumped money and hold it to raise the debt (not paying current debts which are due) level to nowhere. The impact of that period-end gloom, Canadians have increasingly turned from putting money away in bank accounts and other investments, to instead using it to pay down debt.

Once again, while the absolute numbers involved are not enough to budge Canadian debt loads that remain above 100 % of income, it is an indicator that people may be battening down for harder times after this immediate pandemic period.

(to be continued)…