Measures imposed by different levels of government in Canada aimed at curtailing the spread of COVID-19 led to a fall in economic activity unprecedented since the Great Depression, according to a new research paper, which questions whether authorities have “learned any clear lessons” on how to prevent these types of disruptions in the future.
“In trying to put the pandemic behind us, it is not clear whether the federal and provincial governments have learned any clear lessons about how to deal with either a resurgence of COVID-19 or a new pandemic while minimizing disruption to the economy,” says the paper published by the Fraser Institute on Sept. 14 and titled “Storm Without End: The Economic and Fiscal Impact of COVID in Canada.”
While drawing this prospect, the report notes the economy has shown resilience in the face of adversity.
“At the same time, the experience of the pandemic appears to have underscored the ultimate resilience and adaptability of firms, workers, and consumers in the Canadian economy as they adapted to the challenges of a new economic environment,” writes author Livio Di Matteo, professor of economics at Lakehead University.
Citing International Monetary Fund (IMF) data, Di Matteo says Canada’s real Gross Domestic Product (GDP) shrank 5.2 percent in 2020, with revised projections of economic growth now at 4.6 percent in 2021, 3.9 percent in 2022, and 2.8 percent in 2023.
The paper says the “most precipitous fall in economic activity” occurred roughly between January 2020 to January 2022.
The severe drop was followed by a rapid rebound and then gradual economic progress that extended into early 2022, says the report.
What followed was a boom with excess demand, the lowest employment in nearly five decades, inflation, and current rising interest rates.
The Bank of Canada has increased its policy rate by 3 percent since March with more increases expected in October and December.
Di Matteo writes the first wave of the pandemic had the most severe economic impact due to its novelty and the absence of immunity or vaccines.
Closures led to a drop of 11 percent in real GDP in the second quarter of 2020, with rebounds of 9 percent and 2 percent in the third and fourth quarters of 2020.
Economic output ebbed with following waves and by the fourth quarter of 2021, real GDP was only 2 percent higher than two years earlier, “a sign of substantial foregone output,” writes Di Matteo.
Regional Differences
The paper also looks at how different provinces fared economically over the last two years.
It says that Alberta’s economy was the hardest hit with an estimated drop of 8 percent in real GDP in 2020, followed by Quebec and Newfoundland & Labrador at above 5 percent.
British Columbia and Atlantic provinces fared better with real GDP drops between 3 and 4 percent.
Quebec suffered the largest drop in employment at 19 percent by April 2020.
“The correlations between infections and deaths from COVID-19 and GDP and employment performance do not appear as important as that between the length and intensity of restrictions and poorer economic performance,” writes Di Matteo, adding restrictions were imposed mainly to address hospital capacity.
He says Ontario, which adopted some of the most stringent restrictions, was hit hard by drops in retail sales. Meanwhile, Alberta, which had fewer restrictions but a much higher COVID-19 case count, had the second highest employment growth among the provinces.
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Noé Chartier is an Epoch Times reporter based in Montreal.
Twitter: @NChartierET
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