Here’s What BDC Expects for COVID-19’s Economic Impact

Pierre Cléroux, Chief Economist at the Business Development Bank of Canada (BDC), discussed the impact of COVID-19 on the Canadian economy March 25th in a publicly available webinar. We at SREDA are committed to helping the Saskatoon Region understand and weather these uncertain times. To that end, we’ve summarized BDC’s analysis for you:

Short-term Economic Shock With Recovery Starting in Q3 2020

BDC sees two directions where the impact of COVID-19 might take the economy. In one, a severe but temporary economic shock involves the economy starting to recover towards the end of 2020. Since China was the first country to fight the virus, we can learn from their experience, which showed major drops in retail sales and industrial output but rebounding consumer confidence after two months. Canada’s debt to GDP ratio is the lowest of the G7 countries, so we can afford to spend money in support of economic recovery. Billions of dollars of economic stimulus have already been announced along with reduced interest rates.

Possible Longer-Term Recession From Global Struggles to Contain Virus

In the other scenario BDC discussed, periods of slowdown will be felt at different times across the world. The global economic downturn will be longer and will have a sustained impact on the Canadian economy. Since some countries are not able to fight the virus as effectively as others, the impact will be both longer and stronger, resulting in a longer-term recession.

Canadian Businesses Widely Affected

Currently, 73% of Canadian businesses have felt a negative impact from COVID-19, with many stating that a lack of demand is affecting business operations. Disruptions to both the Canadian and world economies have also weakened the Canadian dollar to $0.69 USD; it is likely to remain low for several months because of declining oil prices and a stronger U.S. dollar.

Unemployment Rising Quickly

Many businesses have already started to lay off their workforce, with a current total of almost 1 million individuals filing for employment insurance in the last week. The Government of Canada and many provincial governments have introduced measures to help Canadian households and businesses. To access a frequently updated list of resources relevant to the Saskatoon Region, see our COVID-19 Support Resource List.

Consumer Confidence to Rebound

It is expected that Canada will be in a recession for the overall 2020 year, with a total contraction of 1.0%. The forecast for the second quarter is a contraction of 11.4%, followed by recovery of 1.7% in the third quarter and a rebound of 12.6% in the fourth quarter of the year.