Canada’s political, economic roller-coaster only gaining speed as 2020 rushes on

OTTAWA—As they say in Haiti, “Beyond the mountains … more mountains.” So it seems with the Canadian economy. In light of today’s conditions, it might be advisable for Finance Minister Bill Morneau to roll out the 2020 budget package sooner rather than later. With falling exports, weakening business investment, and rail blockades, expectations for Canadian economic growth in 2020 were already being scaled back before COVID-19 exploded around the world. The epidemic has taken more than $6-trillion in wealth from global stock markets and appears on the brink of sparking a recession along the lines of the 2008-09 world downturn. With such nightmare scenarios strengthening by the hour, the Bank of Canada’s interest rate decision on March 4 is sure to come under intense scrutiny. Until recently, an effort to boost the economy by lowering the central bank’s influential overnight rate below 1.75 per cent, where it has stood for more than a year, was seen as unlikely. But expectations have rapidly changed, with analysts saying central banks should move very quickly to do what they can to offset the disastrous impact of the spreading virus. And, barring a miraculous containment of COVID-19, it looks like it will take more than a round of rate cuts by central banks to significantly mitigate the onrushing economic crunch. Expect a hurried effort by G-20 nations to agree on a co-ordinated strategy of pro-growth stimulus spending if the epidemic continues to worsen After Canada’s discouraging economic showing in late 2019, forecasts for Canadian growth this year were in the relatively lacklustre 1.4-per cent range as of last week. While previously Morneau had been talking of an upcoming budget package focusing on the environment and issues such as gun control, protecting the overall economy would seem to be the most pressing theme now. This exigency comes at a particularly tough time, since Canada is struggling with a defining moment in its economic make-up and future growth over climate change and the development of oil and natural gas resources. The factors—political, regional, and Indigenous-related—in this unfolding drama are monumental, divisive, and volatile, as events of the past few months have demonstrated. Put briefly, the country needs to undertake a long-term transition to a post-fossil fuel economy while trying as much as possible to reap the economic benefits available from doing so in a smart, aggressive, and co-ordinated fashion. In this context, Canadians in general seem ready for stepped-up climate change measures. But at the same time, it has to be remembered the oil and gas sector is still one of the largest single contributors to the country’s GDP and its exports. Allowing the petroleum industry to crater is unsustainable economically, not to mention the incalculable damage for national cohesion. Although Canada has recovered gradually from the 2008-09 recession and unemployment has hit a 40-year low, the underlying economic elements are anything but propitious. Individual Canadians, many of whom think the recession never ended, are coping with a decline in secure jobs, rising living costs, and a huge debt overhang. Income inequality is eroding the social contract. And without resolution, the long-festering issue of Indigenous rights could pose serious risks to the smooth functioning of the country and its economy. Business investment in machinery and equipment, one of the main levers behind economic prosperity, continues to be a weak spot, although the renewal of NAFTA might relieve some of the uncertainty blamed for this trend. Against the backdrop of the virus epidemic, Canadians may be inclined to put aside their differences and pull together to try to do the hard work of addressing these problems. But laying the foundation for a post-industrial economy while overhauling the country’s traditional natural resource-based economic formula at a time of conflict—over environmental policy, regional wealth distribution, and Crown-Indigenous relations—would severely test any federal government. So, Prime Minister Justin Trudeau is turning to Canadians for answers. In a speech March 2, he said Ottawa will be consulting with business, Indigenous people, and other citizens on how to turn Canada’s economy green. This initiative reflects the thinking of leaders like former Bank of Canada governor Mark Carney, who is rallying international investors to the idea that future business ventures will fail unless they are environmentally sustainable. It remains to be seen whether Trudeau’s commissioning of more discussion will be viewed as a chance for Canadians to try to forge their future together or as a means of kicking the current issues down the path to put off decisive action. Conservative leadership contenders Peter MacKay, Erin O'Toole, and Marilyn Gladu seem to have made up their minds. Seizing on the recent turmoil arising from Indigenous protests, they've vowed, if successful, to direct the party to try to defeat the Liberal minority government and force an election before the year is up. Les Whittington is a regular columnist for The Hill Times. The Hill Times

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Canada’s political, economic roller-coaster only gaining speed as 2020 rushes on

Barring a miraculous containment of COVID-19, it looks like it will take more than a round of rate cuts by central banks to significantly mitigate the onrushing economic crunch.

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