Atlantic Canada’s Economy Could Recover By Mid-2021, If We Don’t Mess It Up
SAINT JOHN — The impact of Covid-19 on Atlantic Canada’s economy is very bad.
But most of the economy could recover by mid-next-year if we don’t mess it up.
That was the Atlantic Economic Council’s message in a webinar Tuesday called “Covid-19: The Unfolding Economic Impacts in Atlantic Canada.”
The webinar, which was open to both members and non-members, dove into the impacts the coronavirus has had on the region’s economy so far, as well as what’s to come and what economic recovery may look like.
Here are the highlights:
The overall economic impact? It’s bad.
APEC says that in March, Atlantic Canada’s GDP was down by about 10 percent.
“March was only the beginning of the shutdown,” said APEC’s president and CEO David Chaundy during the presentation. “A lot of the shut down only happened in the second half of the month. So we think we’re going to see another double-digit decline in output in April.”
APEC expects the GDP to decline in April by another 13 percent. That leaves this quarter, April, May, and June, down over 20 percent from this time last year.
“It’s a very significant decline in overall output,” said Chaundy.
But if some physical distancing measures start being lifted in June, we may start to see some of the Atlantic provinces start to recover.
“But I just want to emphasize that we just don’t know how quickly some provinces will start to open up. This recovery can be a lot slower than we’re currently assuming. But in this scenario, we’re still looking at a double-digit decline in overall economic output in Atlantic Canada this year,” said Chaundy.
“Certainly, that’s larger than some of the banks and others are forecasting, but I think we want to be very cautious about how quickly we assume things are going to get back to normal.”
What industries have Covid-19 impacted? Basically all of them, and some really bad.
“Every industry has been affected to some degree or another complying with Covid-19 health requirements,” said Chaundy. “Some are unable to operate or shut down, some are facing a declining demand as consumers stay home. Others are struggling with supply chain issues or to maintain their workforce.”
But some industries have been hit much harder, including accommodation and food services and arts, entertainment and recreation. These industries count for a combined three percent of Atlantic Canada’s economy but account for nine percent of employment.
“So they have a much bigger employment impact and they have been hit very hard,” said Chaundy.
The retail sector has also been hit hard. Some businesses in the sector have suffered a decline in output of more than 50 percent.
“The overall decline in retail is masked by increased spending at grocery stores, as well as in online sales,” said Chaundy.
Other hard-hit industries include construction, manufacturing, fishing and agriculture, and wholesale and transportation. Chaundy pointed out how a lot of these industries are interconnected, and one’s full recovery relies heavily on the recovery of another.
“This has applications for the [economy] restart because some businesses will not be able to fully ramp-up until the end-user is back in operation,” he said.
“Until we’re back in our restaurants eating the meals we used to eat, the demand for the food processors and their demand for agriculture … will not fully come back.”
RELATED: Half Of Small Businesses Will Close If Restrictions Stay In Place Past May
Atlantic Canada has seen the biggest monthly job decline on record, a loss of close to 50,000 jobs in the region, which is about four percent of total employment. But that’s just based on March numbers. Chaundy expects to see that number grow once April job numbers are available.
“This data was collected as things were starting to shut down,” he said. “So we would expect the April data to show an even larger decline.”
Full economic recovery? Be patient. Let’s not mess it up.
Though some provinces, including New Brunswick and Prince Edward Island, are slowly starting the economic recovery phase, Chaundy said the road to full recovery will be just that — slow.
“The advice to government is to be careful to get this right because the shutdown has already been hard enough,” he said.
Chaundy said the region’s full economic recovery depends largely on when borders, both interprovincially and internationally, are fully reopened. International trade accounts for about three-quarters of Atlantic Canada’s GDP. The region’s biggest international trading partners are the United States and China.
“This region in Atlantic Canada cannot fully recover until we see a recovery in our provincial and international trading partners,” he said. “Ultimately until we see goods, services, and people flowing freely across jurisdictional borders, we’re not going to see a full economic recovery.”
Interprovincial trading accounts for about 60 percent of Atlantic Canada’s GDP. Right now, the region’s biggest interprovincial trading partners are Ontario and Quebec, which are dealing with significantly more cases of Covid-19.
“When you look at our exports to other provinces, Ontario and Quebec, where we are seeing the highest intensity of reported cases per population, account for 50 percent of inter-provincial exports,” said Chaundy. “The recovery, the size of the downturn, and the start of the recovery in those two provinces are really critical for a number of businesses providing goods and services in Atlantic Canada.”
APEC believes the government’s main policy priorities should continue to be virus containment; securing supply chains; financial credit/market measures such lower interest rates; cash flow support for businesses; and income support for households. But Chaundy warned that Canadians will be paying for these supports down the road.
“That will push up tax rates in the years to come to pay for those increased debts and debt service payments,” he said.
In terms of when Atlantic Canada’s economy will be fully recovered, there are a few possible scenarios depending on how it plays out. But if everything goes right, the economy could be back to pre-pandemic levels by mid-2021 or in early 2022. Some industries, such as tourism and hospitality, could take longer than others.
“It will take different lengths of time for different markets to recover and that has implications in the length of that recovery,” said Chaundy This is important for our tourism industry. The number of room night sales in Atlantic Canada peek, as you expect, in July and August. So the longer this goes on, the longer the cumulative losses.”
Like some provinces have already been doing with their recovery plans, APEC is recommending a phased-in approach when it comes to opening up the economy, starting with lower-risk activities then working the way up.
That of course, if there isn’t a second wave of the virus – something Chaundy says governments need to avoid.
“I would emphasize that we do not want to see a second or third wave of this. If we see things being relaxed and then we see them being tightened [again], that’s going to be really bad for the business community,” said Chaundy. “I think governments really need to be cautious in how quickly they reopen because can’t rule out a possibility of a second or third wave.”