Although the actual economic fallout of the COVID-19 pandemic is clouded by uncertainty, experts agree the longer the global economy remains at a near-standstill, the more difficult will be the return to normalcy.
Last week, the International Monetary Fund issued a grim forecast, predicting the world economy would suffer its worst year since the Great Depression, while Canada’s economy was expected to shrink by 6.2 per cent.
“I think the question is going to be how much of this crisis that we are experiencing is a permanent change or a temporary change,” says University of Winnipeg Economic associate professor Stefan Dodds.
“So if we think that within a month or two we have the pandemic under control and aren’t so worried about disease transmission and things can rebound quickly.”
Dodds says the longer the shutdown persists, the more likely it is businesses will go under and jobs will be lost permanently.
How long the window for a speedy recovery will remain open is anyone’s guess at this point, but according to a report released today by Statistics Canada, 34.5 per cent of Canadian workers expressed concern they could lose their job or main source of income within the next four weeks.
Keeping people on the payroll may be what separates the country from entering a recession or depression.
“I think the idea is we need to try and keep as many of these businesses going as possible so when we get over this crisis they can start up again,” says Dodds.
Indeed, the effects are already piling up in Manitoba, with the unemployment rate rising from 5 per cent in February, 2020, to 6.4 per cent the next month — or approximately 8,600 more people without work, bringing the total to nearly 44,000.
A recent survey by MNP LTD shows nearly half of people in Manitoba and Saskatchewan are on the brink of insolvency, saying they’re $200 or less away from not being able to pay all their bills each month.
“The shock is a global one, affecting all countries, but commodity-producing countries like Canada are being hit twice,” said Bank of Canada (BoC) governor Stephen Poloz last week in his opening statement to the House of Commons Standing Committee on Finance.
“Beyond the impact of the necessary public health measures to contain the virus, the economy is also being hurt by the plunge in world oil prices.”
The BoC is attempting to stabilize the economy, and has lowered its policy interest rate three times to 0.25 per cent, but admits little can be done to cushion the blow in the short-term.
Breaking away from tradition, Poloz said he would not be giving a detailed economic forecast for the economy because “the economic outlook is highly conditional on how long the containment measures remain in place and how households and businesses adapt.”
Financial expert Evelyn Jacks, of the Knowledge Bureau, says no matter how little, now is the time to save wherever possible.
“You may have to re-budget, you may need to go back to thinking about whether or not you want to spend money on frivolous things,” Jacks says.
“And figuring out: do you have the money that you’re going to need for the fall and do you have enough for the emergency fund in case you don’t get rehired?”
If there can be any good news amidst the uncertainty, Jacks says for people without debt — or who are at least more financially secure — now may be a time to consider some investments before the market is expected to rise in 2021.