British Columbia is headed into a potentially nasty recession, according to the latest analysis from the Business Council of B.C.
The organization’s latest 2020 forecast amid the novel coronavirus pandemic suggests the province’s economy could shrink between seven and 12 per cent.
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“Both those numbers would be unprecedented, even the lower one, in terms of a decline in economic activity,” council president Jock Finlayson told CKNW Radio, Tuesday.
“So we’re really in uncharted waters here, there’s no doubt about that.”
Finlayson said even the seven-per-cent figure would be the same as about three times the impact of the Great Recession in 2009.
Fewer than three weeks ago, the council was still predicting modest growth for 2020 of about 1.5 per cent.
Finlayson said it was difficult to calculate the magnitude of the effect of completely shutting down entire sectors.
He said if the crisis goes on for more than three or four months, it it would amount to a “complete sort of meltdown.”
The Canadian Federation of Independent Businesses warned Tuesday that a third of all small businesses in the country could go under within the month without additional aid.
The federal government is offering businesses a 10-per-cent wage subsidy to keep employees on the payroll, deferring income tax payment deadlines until September, and boosting tax credits to small and medium-sized businesses.
The B.C. government is deferring payment of a slew of provincial taxes, including PST and the Employer Health Tax until the end of September, and cutting the school tax for certain property classes.
Finlayson called those good first steps, but urged more action than “temporary tax relief.”
“Given the numbers … around the decline in economic activity that were anticipating, I think it’s pretty clear governments, both federally and provincially, will have to do more, as will the Bank of Canada.”
B.C. and Ottawa need to study what countries in Europe are doing, he added, and be prepared to borrow the best ideas that will work in Canada.
He pointed to Denmark, which is guaranteeing wages up to 75 per cent, and Germany, which is spending “enormous sums” to support companies of national importance.
Finlayson said the European Central Bank is expanding its quantitative easing program and directly buying debt issued by corporations to try to stabilize credit markets and waves of bankruptcy.
Quantitative easing is an unconventional monetary policy that sees central banks buy government securities or other securities in an effort to increase the supply of money and stimulate the economy.
“My own personal view — and we’re (the Business Council of B.C.) not ready to recommend this — but my own view is we’re going to have to look at options like that in Canada, if this crisis persists over the next few months.”
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