The COVID-19 has had a devastating impact on the world. As of December 19, 2020, over 75.5 million cases of COVID-19 have been reported, with more than 1.67 million fatalities occurring from the novel disease. After a gradual reopening of economies as the first wave of the pandemic started to decline, the second wave has proven to be deadlier.
Global economies virtually grinded to a halt amid rising cases earlier in the year, leading to a permanent shift in the operating landscape for millions of businesses worldwide. As the year draws to a close, there have been substantial victories in the drive to find a solution for the disease. With better protocols in place to ensure safety, a change in the operating landscape, and positive news in the development of a vaccine, the disease might subside. However, the economic impact of COVID-19 will likely be felt for several years to come.
We’re going to take a look at the Canadian economy’s projected outlook post-COVID-19.
Canadian Gross Domestic Product (GDP)
IBISWorld projects a 5.6% decline in the overall Canadian GDP by the end of 2020 due to the economic impact of COVID-19. The main reason for the projection is a gradual decline in industrial activity at the onset of COVID-19 that began in the first quarter of the year. Supply chain disruptions, a decrease in demand, and the panic caused by the pandemic fueled the abrupt slowdown.
As businesses shut down because of mandated social distancing measures, the country experienced record-breaking job losses across the different sectors of the economy. The rollout of a vaccine can counteract the impact of the virus in the long run. IBISWorld projects the GDP to increase by 5.1% in 2021, possibly muting the effects of the GDP drop this year.
The projected annualized growth for Canada’s GDP is 3.2% over the next five years. However, there are uncertainties relating to commodity price fluctuations that can have an effect on the movement.
Canadian Unemployment Rate
The COVID-19 economy has been marred by record unemployment rates worldwide. The spread of COVID-19 prompted lockdowns to curb the spread of the disease. The mandatory closure of all nonessential businesses throughout the country managed to contain the virus to a large degree. However, it came at the cost of millions of people losing their jobs.
The service sectors took the brunt of the impact as airlines, tourism, and hospitality industries saw a sharp rise in unemployment rates during the second quarter of 2020. As better SOPs were integrated to adapt to the changing business landscape, many people began returning to work.
Unemployment rates rose to almost 70% in 2020. However, IBISWorld projects the unemployment rate to decrease by almost 18% over the next year as the economy gradually recovers. A successful vaccine rollout could lead to a projected 9.7% annualized decrease in unemployment rates in the next five years.
Canada’s COVID-19 Economic Response Plan enacted by federal legislation in March 2020 has turned out to be a monumental undertaking. The government pumped millions of stimulus funds into the economy to support businesses that have been negatively affected by COVID-19. The government initiated several relief programs to help different segments of the Canadian population to support it, depending on the severity of the impact.
The Canada Emergency Response Benefit (CERB), the Canada Recovery Benefit (CRB), and the new and improved Employment Insurance (EI) benefit are three of the relief programs that the Canada Revenue Agency (CRA) initiated in response to the economic impact of COVID-19. CERB paid out $2,000 taxable benefits for four-week periods to self-employed and employed Canadians who lost their jobs in 2020 due to the pandemic.
CRB and the EI program also provided similar taxable benefits to affected Canadians with varying payment structures, depending on whether applicants qualified for the benefits.
The Canada Emergency Wage Subsidy (CEWS) program granted Canadian employers a subsidy of up to 65% on employee wages for up to 24 weeks to help businesses rehire employees laid off due to the pandemic. Additionally, the Canada Emergency Business Account (CEBA) provided small Canadian businesses and nonprofit institutions interest-free loans of up to $40,000.
The monumental government stimulus packages in response to COVID-19 has been a major source of relief for the Canadian economy, keeping it relatively afloat during the unprecedented “black sheep” event.
The Canadian economy is projected to recover in the long run. With the rollout of vaccines planned to inoculate most Canadians by September 2021, the resumption of economic activities, international and domestic travel, and improved Canadian CCI could fuel a rapid recovery. However, the economic impact could lead to a permanent change in the business landscape.
It remains to be seen whether there are further developments with COVID-19 and its effects on the economy in the future, but the outlook is generally quite hopeful.