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By Kim Biggar
On December 8, Peter Hall, Chief Economist for Export Development Canada, hosted a webinar with more than 1,600 attendees to look at how COVID-19 has affected the current global economy and EDC’s economic forecast.
An economic snapshot “begins and ends with COVID data,” said Hall. He pointed to the Johns Hopkins COVID-19 dashboard, which provides regularly updated information about cases around the world. Exporters should “keep a very close eye” on this information for the areas where they have operations or sales, he advises. The data is available by country and regionally for some countries.
In a nutshell, when cases increase, generally economic lockdowns follow, leading to diminished economic activity. This makes the information about case numbers the leading economic indicator at this time. When cases decrease, it provides an opportunity for companies that are paying attention to quickly step in to meet needs that others may not be prepared to fill as they bring back employees and ramp up production.
Although many people are experiencing economic duress during the pandemic, many others are collectively accumulating “a massive amount of money” in savings thanks to their reduced consumption. When the pandemic subsides, that money—about $285 billion in Canada—will be unleashed, stimulating economic growth. While that would likely cause inflation in normal times (more money than goods available, people bidding against each other for the goods causing rising prices), the ongoing stimulus should offset that effect. There is expected to be spare capacity to fill goods gaps and keep prices down, at least for a couple of years.
Overall, goods sales are now “doing well” in Canada, with some exceptions, but services have taken “an enormous plunge” and are making very little progress toward recovery. EDC expects this to be the case until well into 2021.
EDC’s 2021 forecast signals robust global growth, at 5.6 percent. Rebounds indicate that the forecast is achievable; however, EDC expects the recovery to be uneven, to occur in waves through next year, and to be uneven by industry.
Because all economies globally have weakened through the pandemic, currencies are depreciating against each other, making them a poor indicator of economic health. EDC is looking to other indicators, including interest rates. EDC anticipates that low interest rates will remain in place until 2023. Businesses in strong sectors will likely be able to benefit from these low rates going forward.
With trade as Canada’s “growth story,” the resurgence of our trading partners will be key to the country’s success. And because of expected labour shortages, Canadian businesses are encouraged to “get on the wagon” of mechanization, to find technology solutions as virtual activity continues to increase.
To try to minimize supply chain risk, more companies are looking at the possibility of nearshoring, to have facilities located where sales take place, wherever that may be globally, to reduce ocean shipments and create more “self-contained units.”
The hour-long webinar, now available on demand, provides more information, on industry performance, commodities, business and consumer confidence, access to capital and so on.