Starting back in March/April of last year, economists began to see that the lockdowns and restrictions caused by COVID-19 were beginning to show a detrimental impact on both the American and Canadian economies. The economic decline is clearly shown by the Gross Domestic Product (GDP) statistics which are used as a comprehensive scorecard of a given country’s economic health. As a broad measure of overall domestic production, the GDP is defined as the total monetary or market value of all the finished goods and services produced within a country’s borders in a specific time period.
The U.S. GDP shrank by 3.5 percent last year as the novel coronavirus upended American businesses and households, making 2020 the worst year for U.S. economic growth since 1946. Similarly, the real GDP in Canada decreased 5.1 percent in 2020 (from the 2019 annual level to the 2020 annual level), compared with an increase of 2.2 percent in 2019. In addition, unemployment rates in both countries climbed and continue to climb to this day with new layoffs by major companies being announced daily.
The real question now is as to whether the economies have hit bottom? Or will things just get worst as we continue to battle the current coronavirus outbreaks, especially the new variants, and the rate of vaccinations continues to lag behind? Optimistically, economists surveyed by the Wall Street Journal predict a strong rebound in 2021, with the economy growing by 4.3 percent. Looking forward in the long-term in Canada, the GDP growth rate is projected to trend around 2.70 percent in 2021 and 1.70 percent in 2022, according to several econometric models. Nothing really to brag about! The Chinese GDP is expected to grow by over 6.0 percent this year.
While GDP projections are all good and dandy, there are several issues of concern when it comes to both economies. The longer the pandemic reigns, the biggest concern continues to be the impact on small businesses. Many small businesses in the retail and service sectors will not survive. Remember that small businesses are still the biggest creators of new employment. Travel, hospitality and recreational sectors have also been hit hard, and their survival will greatly depend on how quickly their customers feel safe enough to once again travel. One must ask also just how well our health care systems will cope with rising COVID cases? In addition, the economy will emerge in a very different form, especially when it comes to the make up of the labour market and the increasing use of new technologies. We more than likely will continue to see high unemployment rates in the near future, especially among women, youth, minorities and vulnerable groups. Given continuing job security concerns, will people begin to once again consume at normal rates? My feeling is that our economies have not as yet really hit bottom. Unfortunately, it may be months before one really sees any kind of actual turnaround.