Updated: Mar 29, 2021
Policy Brief by Jesse Hsieh.
On October 20th, 2020, Statistics Canada reported in their six-month update on the social and economic impacts of COVID-19 that there had been unprecedented declines in output. The real GDP had dropped by a drastic 11.5% during the second quarter; to put that in perspective, the 2008-2009 recession had only brought about an annual GDP drop of 2.9% .
In response to such a steep drop, policymakers and economists are developing models that detail the different paths to recovery that could take form, with numerous guides online to help visualize what each recovery shape means . Consequently, most experts predict that different industries will likely take their own paths to recovery, with the overall economy recovering gradually over time .
This article will explore how the pandemic has impacted the Canadian economy, and what we can expect to see moving forward.
Uneven Impact Across Population Groups
According to the six-month update on the impacts of COVID-19 by Statistics Canada, the unemployment rate rose drastically from 5.6% in February 2020 to 13.7% in May 2020, but has slowly been recovering, and reached 10.2% in August 2020 . However, key findings of the report showed that the economic impact of the pandemic varied unevenly across population groups:
the unemployment rate amongst young Canadians rose to 23.1% in August 2020, which was twice the amount observed in February 2020;
for selected visible minority groups, the unemployment rate ranged from12.7% to 17.9% in August 2020, compared to a 9.4% unemployment rate amongst the non-Indigenous, non-visible minority population;
compared to 25% of non-Indigenous participants, 36% of Indigenous participants reported that “the pandemic had an impact on their ability to meet financial obligations or essential needs,” .
Uneven Impact Across Business Sectors
The United Nations Conference on Trade and Development (UNCTAD) detailed in a report that COVID-19 had “an excessive effect on two sectors - tourism and micro, small, and medium-sized enterprises - which employ many vulnerable groups” . Considering international travel, this statistic doesn’t come as a surprise. The Canadian airline industry was down 88.2% of revenue the summer of 2020 compared to the summer of 2019, with passenger demand remaining low despite signs of recovery .
Statistics Canada also reported that lower-wage services had “been impacted to a much greater extent than high-wage services” . Younger workers entering the job market will also take a hit to their earnings, with potential losses ranging from $8,000 to $15,000 .
Nearly 25% of businesses with rent or mortgage payments had been granted deferrals, and 75% of small businesses have taken on debt as a result of the pandemic . This means that the Canadian economy will see a decline in business investments; businesses will have to prioritize paying debts off before being able to invest and grow. Reflecting this, Statistics Canada pointed to a 17% annual decrease of investments by businesses in 2020 .
Receiving Relief or Recovery?
The Canadian Mortgage and Housing Corporation (CMHC) predict that without government relief, the economy may rapidly fall into a second “period of downturn” just as the first economic rebound occurs .
The Government of Canada has offered a list of support for individuals, businesses, sectors and organizations in their COVID-19 Economic Response Plan . These types of support address the understanding that uneven displacement cannot be solved through a one-size-fits-all type solution. For future policies, there should be a continued focus on policies that address the understanding that different groups can be impacted differently and will have their own specific needs for assistance.
Statistics Canada, "Economic Impacts and Recovery Related to the Pandemic," Government of Canada, Statistics Canada, October 20, 2020, https://www150.statcan.gc.ca/n1/pub/11-631-x/2020004/s5-eng.htm
Louise Sheiner and Kadija Yilla, "The ABCs of the Post-COVID Economic Recovery," Brookings, May 04, 2020, https://www.brookings.edu/blog/up-front/2020/05/04/the-abcs-of-the-post-covid-economic-recovery/
Peter Armstrong, "Here's What Kind of Shape Canada's Economy Will Be in Coming out of COVID-19 | CBC News," CBC News, May 26, 2020, https://www.cbc.ca/news/business/economic-recovery-letters-analysis-1.5574372
Statistics Canada, “Economic Impacts and Recovery.”
Statistics Canada, "Key Findings," Key Findings, October 20, 2020, https://www150.statcan.gc.ca/n1/pub/11-631-x/2020004/conclusions-eng.htm
"COVID-19's Economic Fallout Will Long Outlive the Health Crisis, Report Warns," UNCTAD, November 19, 2020, https://unctad.org/news/covid-19s-economic-fallout-will-long-outlive-health-crisis-report-warns
Statistics Canada, "Monthly Civil Aviation Statistics, August 2020," The Daily, October 29, 2020, https://www150.statcan.gc.ca/n1/daily-quotidien/201029/dq201029d-eng.htm
Statistics Canada, “Key Findings.”
Statistics Canada, “Economic Impacts and Recovery.”
Tara Deschamps, "W-shaped Recovery Would Be 'severe' without Government Relief: CMHC," Global News, January 21, 2021, https://globalnews.ca/news/7590874/chmc-coronavirus-economic-recovery/
Government of Canada, "Canada’s COVID-19 Economic Response Plan," Government of Canada, February 04, 2021, https://www.canada.ca/en/department-finance/economic-response-plan.html#businesses