CANADA – Despite the sharp contraction of Canada’s economy, Prime Minister Justin Trudeau says the country is not ready for the loosening of economic restrictions within the country.
In the last month, the national economy has contracted sharply as businesses have been ordered closed and Canadians told to stay home.
Preliminary data from Statistics Canada on Wednesday (April 15) showed economic activity collapsed in March, suggesting the drop could be a record nine per cent.
“With spring coming, people are looking outside, wanting to get out, wanting to this to be over — I understand that,” Trudeau said in his daily national address yesterday (April 16). “It will be weeks more before we can seriously consider loosening the restrictions.”
Trudeau says the country is still contending with the first wave of the novel coronavirus pandemic.
Loosening controls too quickly could mean the country gives up the ground gained, he says.
That could cause even greater economic damage than the pandemic has already inflicted.
“As impatient as people are getting all across the country, we need to continue to hold on if what we’re doing as sacrifices are going to be worth it,” he said.
To help, the federal government is loosening the eligibility criteria for emergency federal pandemic aid to cover seasonal workers without jobs and workers whose hours have been drastically cut but who still have some income.
The details announced will allow people who are making up to $1,000 a month to qualify for the Canada Emergency Response Benefit for COVID-19.
And those whose employment insurance benefits have recently run out will also qualify for the $2,000-a-month benefit.
Some six million people have applied for the help since the middle of March when businesses were ordered closed and workers to stay at home as a public health precaution.
For those doing jobs deemed essential, Trudeau says the federal government will top up their pay to encourage them to keep going into work during the health and economic crisis.
The Bank of Canada is warning the downturn tied to COVID-19 will be the worst on record and the economic recovery will depend on the effectiveness of current measures to bring the pandemic under control. The bank announced it is keeping its key interest rate target on hold at 0.25 per cent, saying it is effectively as low as it can go to combat the economic impacts of COVID-19.
If conditions improve quickly, the economic shock is likely to be “abrupt and deep, but relatively short-lived” and followed by a strong rebound for most, but not all, sectors of the economy.
A more severe scenario would likely see a “significant number” of businesses closing for good and longer spells of unemployment as workers look for new jobs.
A longer downturn would also mean households, businesses and governments could have higher debt by the time the recovery takes hold.
No matter the scenario, all the possibilities suggest “the near-term downturn will be the sharpest on record,” the report reads.