“It’s frustrating that it’s taken so long for them to recognize that we’re part of the solution here in Newfoundland and Labrador,” Johnson said. The province’s unemployment rate will hit 14 per cent by the end of the year, the highest level in the country, and will continue to remain in double digits until at least 2022, TD Bank Group forecasts.
O’Regan has previously said the federal government is “at the table right now, hammering out concrete steps needed to support the offshore (oil industry).”
The minister agrees the historic collapse in global oil prices this year following the pandemic and Saudi-Russian oil price war has been challenging for the industry across the country and especially on paused activity offshore Newfoundland.
But asked whether there would be support going to Husky, O’Regan said, “Certainly for the industry.”
Back West, the oilpatch is watching for signals from Ottawa, amid a deteriorating environment for the industry.
According to a report released this week by the Canada Energy Research Institute, 14,000 jobs were lost in Alberta’s oil and gas industry between March and May 2020 alone.
The majority of those jobs — 11,000 — were lost in the oilfield services industry, CERI vice-president research Dinara Millington said, adding that federal spending on reclaiming orphaned wells will help put 8,200 people back to work in the province but not fully offset the losses.
“So there’s obviously still a gap but one of the bigger conclusions we arrive at is, looking at the stimulus package, it’s still not enough to get the sector back to the pre-COVID trend line,” Calgary-based Millington said.
Looking at the stimulus package, it’s still not enough to get the sector back to the pre-COVID trend line
Whether Canada’s economy fully recovers by the end of next year “will depend on both the success in developing a solution to the health crisis and the ability of workers to return to work,” Royal Bank of Canada economists wrote in a Sept. 10 research note. The report shows that real GDP declined 13.4 per cent in the second quarter. Overall, RBC expects real GDP to shrink 6 per cent this year.
The immediate economic pressures following the pandemic are being felt across the country, with the retail, hospitality, aviation and energy sectors hardest hit and vulnerable to further declines.
“We need to focus the limited money that we have on the areas that will have the greatest impact,” Canadian Chamber of Commerce president and CEO Perrin Beatty said, adding the federal government needs to focus “less on the rainbow and more on the pot of gold.”
Beatty said he’s concerned the federal government’s focus on green spending could be at the expense of existing industries that can be provide a quicker economic rebound.
Indeed, the federal deficit is expected to climb to $343-billion this year, with the Liberals proposing another $37-billion income-support package of benefits and changes to employment insurance when the Canada Emergency Response Benefit winds down soon.
Trump originally imposed tariffs on Canadian aluminum in the summer of 2018 and kept them in place until May 2019. At the time they were lifted, Trump reserved the right to reimpose tariffs if Canadian export volumes “surge meaningfully beyond historic volumes of trade over a period of time.”
In August, the Trump administration said that Canadian exports of non-alloyed aluminum climbed 87 per cent from June 2019 to May 2020 compared to the previous 12-month period, and accused Canadian producers of hurting the U.S. aluminum sector.
In May, Alcoa Corp. said it would lay off hundreds of workers at an aluminum smelter in Washington, but federal legislators from the state wrote in a letter to Trump that China was to blame for a globally depressed aluminum market.
Jean Simard, president of the Aluminum Association of Canada, which opposes the tariffs, said during the panel discussion Thursday that when the non-alloyed aluminum exports from Canada rose, “there was a corresponding drop in value added aluminum.”
He said the definition of “a surge” has always been vague, but argued these circumstances do not fit the criteria.
“The COVID driven market transition that happened early in the spring and summer here and around the world certainly does not qualify for this definition,” said Simard.
Foreign traders, who make money trading physical quantities of P1020 aluminum were the biggest beneficiaries of the tariffs, since it created price volatility, he said.
Martin led the slaying of the budget deficit in the mid-1990s, and Flaherty wore the white hat as head of Canada’s fire brigade during the Great Recession. Morneau was handed no such opportunity: the prime minister was the daily face of the crisis response, even though it was clear that Morneau and his team at Finance were doing most of the work, at least on the economics of it all.
Then, out of nowhere, Bloomberg reported last week that Trudeau was taking advice from Mark Carney, the former Bank of Canada and Bank of England governor. Rumours quickly spread to the pages of mainstream newspapers that the prime minister was losing confidence in his finance minister.
It was clear where this was all headed. On Aug. 17 at about 7:30 p.m. Ottawa time, Morneau, who said he got into politics to make a difference for common folk, announced he had resigned to run for secretary-general of the Organisation for Economic Co-operation and Development, the Paris-based think-tank that counts a few dozen rich countries such as the U.S. and Germany as its members.
“Liberals are more lethal to Liberals than are any competing partisans,” Gerald Butts, the prime minister’s former principal adviser, tweeted.
Morneau’s resignation came with the usual speculation about how markets would react. These are worries from a time when the finance minister mattered. After Flaherty resigned in 2014, Harper replaced him with Joe Oliver, who had little impact. Morneau was just another front-bench minister. Unless Trudeau loosens the reins, Morneau’s replacement, Chyrstia Freeland, will have no more influence than her predecessor did.
There’s a race. There’s a new currency, so to speak. It’s technology
Suzanne Grant, Canadian Advanced Technology Alliance
Restaurants and retailers come and go even in good times. Tech companies were driving employment growth before the crisis, and they will determine the speed of the recovery as the economy continues to go digital and governments and corporations heavily spend on replacements for carbon-based energy. At least that’s how Germany sees it.
Morneau, though, has struggled to satisfy technology firms, which have been regularly disappointed by having to meet criteria for aid that too often are designed for the way things were done in the old economy, not the new one.
“It’s good, but I don’t think it’s good enough,” Grant said of the government’s efforts to shield smaller technology companies. “I don’t think we are valuing what they can do for our future. The world is shifting and it’s competitive. There’s a race. There’s a new currency, so to speak. It’s technology.”
Following the recent hijacking of multiple high-profile Twitter accounts, users on the platform have begun to analyze the cyber attack and the effects it may have on the platform’s future.
Twitter recently faced a major security breach as the accounts of multiple high-profile individuals and companies were hijacked, including Democratic presidential candidate Joe Biden, Former President Barack Obama, Tesla CEO Elon Musk, Microsoft founder Bill Gates, and the official accounts of ride-sharing service Uber and tech giant Apple.
Now, many individuals from multiple fields are reacting to the news that major accounts were apparently easily hijacked in the space of a few hours, and how the platform could prevent such an attack again in the future.
Motherboard reporter Jason Koebler tweeted that photos of internal Twitter tools shared with Motherboard by sources claiming to have knowledge of the hack are being removed from Twitter for containing “personal information,” despite the screenshots simply showing an internal Twitter dashboard with no identifying info.
Earlier, Twitter told us that it was only locking accounts that posted private personal information. The screenshot I tweeted has no personal information in it and was censored, it just shows how an internal Twitter tool pic.twitter.com/7hHxCzhtUL
Many across Twitter have begun to worry about the impact of the hack, game developer Mark Kern best known for working as a team lead on the popular game World of Warcraft tweeted that the hack could have “some really, really, big impacts.”
The more I think about this, the worse this Twitter hack is on multiple fronts.
It’s going to have some really, really, big impacts.
Journalist and eSports commentator Richard Lewis claimed in a twee that the leaked internal tools prove that the company lied to Congress about the types of tools they had in place, this likely refers to what appears to be “blacklisting” options for accounts in Twitter’s internal tools. Dorsey and his staff have long claimed that the act of “shadowbanning” or preventing users’ tweets from being seen is a conspiracy theory.
This Twitter hack stuff is amazing. Not only does it prove how weak their security is, it also proves they lied about the types of tools they had in place when they were questioned by congress. They’re suspending accounts over sharing this btw. https://t.co/tfBqKfV166
Kim Dotcom, the German-Finnish Internet entrepreneur and founder of the file-sharing website Megaupload.com who is fighting 2012 charges of copyright infringement and money laundering related to the site, commented that the hack has revealed that evidence from social media is no longer reliable in Court as it can be edited by Twitter employees or anyone with access to Twitter’s internal tools.
The account of the cryptocurrency wallet MyCrypto posted a number of tweets outlining when certain accounts posted tweets containing links to Bitcoin donation scams and the Bitcoin addresses linked to the scam.
Many made light of the situation including British television host Piers Morgan who tweeted that he would not be tweeting “Bitcoin advice”:
UPDATE: No, I’m not Ghislaine Maxwell’s secret husband, nor am I transitioning, providing Bitcoin advice, quitting GMB, going vegan or replacing Jofra Archer in the Test match. All will be revealed at high noon.
Britain must send “clear signals” that it wants to seal a deal with the European Union on their relationship after Brexit, the bloc’s chief negotiator said ahead of more talks with London, adding a deal was still possible before the end of the year,write Gabriela Baczynska and Jan Strupczewski.
Michel Barnier (pictured) said Britain had so far not engaged with tentative openings floated by the EU side on state aid and fisheries in the previous negotiating rounds, which have mostly been held on video calls due to coronavirus safety restrictions.
“The ball is in the UK’s court,” Barnier told an online seminar on Wednesday. “I believe that the deal is still possible.”
He said he was “disappointed” with Britain’s refusal to negotiate on foreign policy and defence but that he was open to finding a “margin of flexibility” on thus-far conflicting EU and UK positions on fishing and the state aid fair play guarantees.
“As well as with fisheries and governance, we are ready to work on landing zones, respecting the mandate of the EU,” he said when asked how far the bloc could go towards Britain on the so-called level playing field provisions of fair competition.
They are among the chief obstacles to agreeing a new relationship between the world’s largest trading bloc and the world’s fifth-largest economy. Britain left the EU last January and its standstill transition period ends at the end of 2020.
Barnier said “the moment of truth” would come in October when the negotiating teams must finalize a draft deal if it is to be ratified by all the 27 EU member states in time for 2021.
Should talks fail, Barnier said the UK would be more severely affected than the EU if trade quotas and tariffs kick in, meaning that the bloc would not seal a deal at any cost.
“The level playing field is not for sale. It is a core part of the our trade model and we refuse to compromise to benefit the British economy,” he said.
Barnier added that, while Britain refused to sign up to the level playing field commitments in exchange for access to the single market, it was keen to retain very close ties on financial services and the electricity market.
British Prime Minister Boris Johnson wants a narrower trade deal with the EU, but the bloc is pushing for an alliance that would cover transport, fisheries, security and other areas.
Barnier named nuclear co-operation and internal security as areas where progress had been made but said agreeing a role for the bloc’s top court and sealing Britain’s commitments to the European Convention of Human Rights were still missing.
He pressed Britain to advance preparations for the sensitive Irish frontier as agreed under the EU-UK divorce deal last year.
London and the bloc have agreed to intensify negotiations, with contacts planned every week until the end of July and resuming on 17 August after a summer break.
CALGARY — One in four chief executives in Alberta are concerned their businesses might not survive the economic collapse triggered by COVID-19, according to a new survey.
Alberta is the country’s largest oil and gas producing province and is widely expected to record the sharpest economic contraction and drop in employment this year, following the dual-threat of the coronavirus pandemic-induced business closures and the concurrent collapse in oil prices.
The Business Council of Alberta published a survey of its members Monday that showed 26 per cent of respondents didn’t know if their “organization will survive this crisis until a vaccine is widely available or we otherwise reach herd immunity.”
“It’s a lot and it’s surprising,” said Mike Holden, the Business Council’s chief economist, noting that survey doesn’t mean those companies will file for bankruptcy — just that they consider it to be a real risk. “This is businesses who think there is some risk.”
He noted that 64 per cent of respondents had delayed spending, 61 per cent had laid off employees and 54 per cent had implemented pay cuts to survive the crisis.
So far, only a handful of companies have announced widespread layoffs during the current recession, but Holden said there might be more announcements if temporary layoffs become permanent.
It’s a lot and it’s surprising
The survey of leaders at 61 companies conducted by Viewpoint Research between May 13 to May 30 also showed that 61 per cent of businesses expect a slow economic recovery.
“Generally speaking, they’re not expecting it to be quick,” Holden said, adding the uncertainty about the depth and duration of the recession has led to a drop in business confidence.
If Business Council of Alberta’s fears are realized and a quarter of businesses don’t survive the current pandemic, it would mark a dramatic uptick in insolvencies and the business exit rate, which is tracked by the federal government.
In 2017, the last year for which data is available, roughly 15 per cent of Alberta businesses exited the private sector, said Charles St-Arnaud, chief economist with Alberta Central, which provides banking services to credit unions in the province.
By comparison, the data shows the rate of business exits across Canada is about 11 per cent.
“Alberta has kind of a higher entrance and exit rate than other provinces. There is more business creation than average and also more business failures,” St-Arnaud said.
Still, St-Arnaud said he’s expecting to see an increase in insolvencies and business failures as a result of the COVID-19-induced recession. The business closures and insolvencies will likely accelerate in September or October, once federal support programs wrap up, he said.
“The insolvency data for October will have a better look at how bad it gets,” St-Arnaud said.
Large and small companies in the province are struggling to stay afloat. Even as businesses re-open, Alberta’s largest industry is struggling with the dramatic collapse in oil prices and the resultant fall in oilfield activity.
Calfrac Well Services Ltd., one of the largest fracking companies in the Canadian oilpatch, announced Monday that it would defer payment and make use of a 30-day grace period to make an interest payment that was due June 15.
Shares in the Calgary-based company fell close to 9 per cent to 26 cents per share following the news, which warned that a failure to make the interest payment would trigger a default in Calfrac’s credit facilities. The company has drawn $170 million against a $375-million line of credit.
If the company does default, Calfrac would become the first large energy services firm to become insolvent in the current crisis.
The Business Council’s survey noted that the three largest barriers to an economic recovery in the province were low oil prices, a lack of consumer confidence and the global economic downturn causing a lack of demand for exports.
Canada’s six biggest banks survived a severe stress test by the Bank of Canada, which is a relief since they might be the only thing standing between a relatively short recession and something much worse.
The analysis was part of the central bank’s latest Financial System Review (FSR), which is devoted to the COVID-19 crisis.
Generally speaking, the central bank appears confident that its historic response to the shutdown of vast swaths of the global economy has averted disaster. Governor Stephen Poloz stuck to his contention that the recession will be brutal, but probably relatively short, in part because there appears to be little reason to worry about a financial meltdown.
The pandemic remains a massive economic and financial challenge, possibly the largest of our lifetimes, and it will leave higher levels of debt in its wake
Bank of Canada Governor Stephen Poloz
“The country’s banking system and financial market infrastructures are strong enough to deal with the situation,” Poloz said before taking questions on a conference call with reporters. “To be clear, the pandemic remains a massive economic and financial challenge, possibly the largest of our lifetimes, and it will leave higher levels of debt in its wake.”
Still, thanks to decent economic growth during the past few years and the hundreds of billions of dollars in emergency funds that Ottawa is pushing into the economy, the governor said he was “confident that a strong financial system will help Canada emerge from this episode in relatively good shape.”
Unlike many of its peers, Canada’s central bank doesn’t have any regulatory authority over financial institutions. But it does have moral authority, and it wields the country’s most impressive array of economic researchers. Thus, the FSR is an important instrument of policy, since central bankers use it to try to guide behaviour, just as they attempt to steer spending habits by raising and lowering interest rates.
Normally, the annual FSR is a warning mechanism. The Bank of Canada flags vulnerabilities it thinks could lead to pain in the event of a shock. Since we’re currently living through such a shock, this year’s review was more of a “state of play,” as Toronto-Dominion Bank economist Brian DePratto observed. “Vulnerabilities abound, but on balance the bank appears to be cautiously optimistic that the system can handle the current and emerging stresses,” he said in a note to his clients.
The Big Six and the hefty cash reserves they must maintain to satisfy federal regulations are a firebreak in this crisis
Policy-makers are confident that they have avoided a credit crunch, albeit only because they took the unprecedented step of creating tens of billions of dollars to buy government bonds and company debt. The policy seems to be working, since interest rates, which spiked in March as investors retreated when the coronavirus spread through Europe and North America, have returned to pre-crisis levels.
Poloz and the central bank’s other leaders are probably less sure about how many companies and households will survive the recession without declaring bankruptcy.
The central bank reckons about twenty per cent of mortgage borrowers entered the downturn with only enough cash and other liquid assets to cover two months (or less) of loan payments. Many companies are equally fragile, as some of the industries hardest hit by the crisis are also the ones in which companies were already operating with relatively little money in the bank.
“COVID‑19 has hit many households and businesses hard, especially those that are highly indebted or have low cash buffers,” the FSR said. “During this period, emergency measures that provide basic incomes to households and help businesses access credit are crucial.”
Government rescue efforts now exceed 10 per cent of gross domestic product, more than double the value of the fiscal stimulus deployed during the Great Recession a decade ago. Much of the assistance is in the form of emergency loans, and most of that funding is being administered by the biggest banks.
Canada’s banking oligopoly constrains competition and innovation in good times. But the Big Six and the hefty cash reserves they must maintain to satisfy federal regulations are a firebreak in this crisis. Things would be much worse if the banks were as fragile as airlines and oil companies. Fortunately, the banks should be able to withstand a deterioration of current conditions.
Policy-makers ran a simulation of what would happen to the six biggest banks — Royal Bank of Canada, Toronto-Dominion Bank, Bank of Nova Scotia, Bank of Montreal, Canadian Imperial Bank of Commerce and National Bank — if the Bank of Canada’s worst-case economic outlook came to pass.
That scenario, which the central bank acknowledges is plausible, involves a 30 per cent plunge in GDP in the second quarter from the end of 2019 and a slow recovery that would leave economic output below pre-crisis levels for more than two years.
It’s ugly, but the banks survived the test: arrears peaked at a rate that was about double the peak during the financial crisis, and non-performing loans would exceed recent highs. But monetary and fiscal policy counter much of the pain, and the banks’ reserves do the rest. Capital requirements remain above the level required by regulation, which was made tougher after the Great Recession precisely so the most important lenders would be ready for the next economic calamity.
“The six largest banks entered the COVID‑19 period with strong capital and liquidity buffers, a diversified asset base, the capacity to generate income and the protection of a robust mortgage insurance system,” the FSR said. “With these strengths, as well as the aggressive government policy response to the pandemic, the largest banks are in a good position to manage the consequences.”
One night in late January, Canadian Jacob Cooke found himself in Jiangsu province in China, desperately trying to find seats on a plane leaving the country and promising his brother, Joseph, he’d make it to Vancouver.
For more than a decade, they had run a business called WPIC Marketing + Technologies with an ocean between them, helping brands from Canada and, eventually, all over the globe launch e-commerce operations in China.
But that night, panic was washing over China after news channels started reporting on the highly contagious outbreak of the coronavirus in Wuhan province. There was little information about who was most vulnerable, how the virus spreads or what symptoms to expect, but fears were aroused. Soon, trains were shutting down, hotels were closing their doors and slowly, but surely, ways out of the country were disappearing.
“There was definitely not enough information,” Jacob said. “You didn’t know what to believe, you just wanted to get far enough away from it.”
Jacob also worried about his family, including his wife and their two young sons, aged five and nine, who had travelled from their home in Beijing to visit her family in Jiangsu for Chinese New Year, since it looked like they might be stuck there. After spending hours on the phone, he secured seats on a plane leaving Shanghai for Vancouver, and then tracked down a driver to make the six-hour trek to the airport.
Seven weeks later, after Jacob and his family made it safely back to Vancouver, the situation has in many ways reversed: Canada, and most of the western world, are desperately trying to stop the spread of coronavirus, with new measures being announced almost on an hourly basis that shut down parts of the economy, while China is in recovery.
It’s still not clear how the deadly virus will be contained, or what its ultimate toll will be, so the horizon in Canada and elsewhere remains too dark to look for silver linings.
Yet if the worst does not come to pass, the Cooke brothers and others who hold deep business ties to China can see how the global connectivity of our economies may help both countries.
An economic recovery is now taking shape in China. Self-isolation is starting to end, people are returning to offices and work in factories has largely resumed its pre-coronavirus level of activity.
FedEx Corp. on a March 17 conference call said 90 to 95 per cent of large manufacturers in China are now open, as are about two-thirds of small manufacturers. The Hang Seng Index in Hong Kong and Shanghai SE Composite Index both ended the week on a positive swing after brutal declines since the start of the year.
But as supply chains and demand for goods ramps up in China, they’re slowing elsewhere. Yet there were signs of life even in the depths of China’s outbreak.
Joseph Cooke, president of WPIC, said it’s been a strange year in China. Online sales usually dip during the new year celebration, but they remained steady this year, perhaps because people in self-isolation indulged in “retail therapy,” he said.
As the weeks in lockdown progressed, online sales in China accelerated as brick-and-mortar retail stores stay closed. That also provided a lifeline for many Canadian companies, particularly those that need to move seasonal inventory, WPIC chief executive Jacob Cooke said.
“China coming back online is great for Canadian companies,” he said. “With retail closed here, for example, and a lot of stuff being seasonal, it’s got to move somewhere or it’s going to become useless.”
Some companies’ quarterly earnings reports are already bearing that trend out.
China coming back online is great for Canadian companies
For example, Nike Inc. chief executive John Donahoe on Wednesday reported that his company’s e-commerce sales in China increased more than 30 per cent during the last quarter, even as it had closed 5,000 stores in the country during most of that time.
Other parts of China’s economy appear to be returning to normal as well, offering a potential lifeline to companies from Canada and elsewhere needing to sell their goods.
“I was talking today to someone who was in Beijing and she said, ‘Here’s the thing, there was a traffic jam and I had lunch with someone, and it’s the first time I’ve had lunch with someone in weeks,” said Sarah Kutulakos, executive director of the Canada China Business Council.
She said the key to China’s resumption of regular business activity is that everyone has been “incredibly conservative about social distancing and people are taking that very seriously.”
That has benefited Canadian companies with operations in China as well.
For example, Toronto-based Neo Performance Materials Inc., which turns rare earth and rare metal-based materials into magnets and other products used in cars and high-tech devices, operates four factories in China, all of which are now operating and shipping goods again.
None of its 1,100 employees there have contracted COVID-19, but the company has said it implemented precautionary measures including temperature checks of its workers.
On a March 12 earnings call with analysts, chief executive Geoff Bedford said the supply chain is largely functional again, with his factories able to procure all the raw materials they need.
Still, it’s not all good news. China is still experiencing the repercussions from the lockdown period, including declining demand.
“We are seeing signs of slowing downstream demand from our customers, particularly for supply chains that are located within China,” Bedford said on the call.
He noted that more than 60 per cent of Neo Performance’s sales are related to the automotive industry, including vehicles manufactured for the Chinese domestic market, which is one particular area where demand is softening. But he also noted that trend was already happening the previous year.
Aurora, Ont.-based auto-parts manufacturer Magna International Inc. on Thursday reported that it expects softening demand in China, though its customers there are ramping up again after extended downtime throughout February. Meanwhile, many of its customers in North America and Europe have reduced production rates or temporarily closed.
Overall auto sales in the world’s biggest vehicle market dropped 79 per cent in February, according to the China Association of Automobile Manufacturers, which does not expect demand to normalize until the third quarter.
WPIC’s Jacob Cooke said Canada’s economy is intricately linked to China’s economy, even if diplomatic spats and trade wars are decoupling the two countries on cultural and political levels.
“They are completely intertwined,” he said. “If either of those pieces go down, it just creates huge problems for the global economy.”
Jacob was in China as it entered the peak of its outbreak and now he’s back in Canada as the coronavirus takes hold here, giving him some insight into how conditions are progressing in both countries.
“This has sort of been the whole process for me,” he said. “You’re basically experiencing it in cycles: you’re either cycling to further and further lockdowns or you’re opening up.”
Right now, Canada and the United States are still cycling to further lockdowns as the number of new cases detected continues to grow daily. But Jacob and his brother Joseph both said it only takes a bit of good news to swing momentum in the other direction.
“I’m feeling like it’s very quiet in Vancouver, and people are staying home,” said Joseph. “Let’s hope we curb the spread.”
Canada is likely to fall into a recession this year unless the government moves ahead with robust fiscal stimulus as the economy takes a double hit from the coronavirus and tanking oil prices, according to the Bank of Nova Scotia.
Scotiabank is the first of the six largest Canadian banks to predict the country could be headed into a recession, though it believes the government will move quickly enough to avert one. A rapid rise in coronavirus cases globally, the sharp fall in oil prices and volatility in financial markets make a contraction in the second and third quarters this year “likely” in the absence of fiscal measures, Jean-François Perrault, chief economist at Scotiabank, said Wednesday.
“A reasonably mild recession appears likely unless timely and targeted fiscal measures are deployed in the very near future to deal with the economic impacts of the virus,” Perrault wrote in a research note.
Prime Minister Justin Trudeau released $1.1 billion in new funding earlier Wednesday in response to the virus, and said the government is ready to do more if necessary. Trudeau also said his government is prepared to use federal financing agencies to further stimulate the economy if needed, a measure that was deployed during the 2008-09 financial crisis.
But that may not be enough. Canada’s measures pale in comparison to those set out by countries such as Italy, which plans to spend as much as 25 billion euros ($28.3 billion) on stimulus measures. Perrault recommends the government roll out a fiscal package equivalent to one per cent of GDP, or just over $20 billion, in order to prevent the Canadian economy from going into recession.
The Toronto-based bank sees the country’s gross domestic product growth slowing to 0.3 per cent for the year in the absence of significant stimulus. Scotiabank’s isn’t the first bearish call to emerge this week in the aftermath of the oil price collapse but it does represent the most aggressive take yet on Canada’s future.
National Bank of Canada Financial and Royal Bank of Canada will release their forecasts later this week. Bank of Montreal was the first of the six banks to revise their forecasts lower this week, with a call for full year GDP growth at 0.5 per cent.
The latest stream of downward revisions include predictions that the Bank of Canada will cut rates to 0.25 per cent by June from its current 1.25 per cent. That’s in line with financial market expectations, according to overnight index swaps trading. The last time the Bank of Canada policy rate reached 0.25 per cent was in 2009. Earlier this month, the central bank cut interest rates by 50 basis points amid escalating coronavirus concerns, matching an emergency move by the Federal Reserve.
Here are the latest revisions from bank economists this week:
Scotiabank — Jean-François Perrault
Sees Canada’s 2020 GDP at 0.3 per cent in absence of substantial fiscal stimulus and 0.7 per cent if there is fiscal stimulus worth one per cent of GDP. Without fiscal stimulus, Q2 and Q3 GDP will contract. Expects the Bank of Canada to cut interest rates by 50 basis points at the next two meetings.
Bank of Montreal — Michael Gregory
Lowers 2020 GDP to 0.5 per cent from one per cent, and sees Q2 contracting by 3.5 per cent. Expects Bank of Canada to cut rates by 100 basis points over the next two meetings to 0.25 per cent.
JPMorgan — Silvana Dimino
Revises down 2020 forecast to one per cent or 1.1 per cent Q4/Q4 basis. Predicts no growth in Q2 and a two per cent rebound in Q3. Expects Bank of Canada to cut by 50 basis points in April with the “heightened risk” for an earlier emergency cut to zero per cent.
Goldman Sachs — Daan Struyven
Revises down 2020 GDP to 0.4 per cent or 0.2 per cent on a Q4/Q4 basis. Sees Canada on “verge of recession” with a zero per cent Q1, -0.5 per cent Q2, 0.25 per cent Q3 and one per cent Q4. Expects Bank of Canada to lower policy rate to 0.25 per cent by its June meeting.
— With assistance from Erik Hertzberg and Kait Bolongaro