With the advent of the COVID-19 pandemic, Canada is in the midst of an economic downturn, unlike anything most of us have ever experienced. The Conference Board of Canada’s Provincial Economic Outlook – Preliminary Forecast Spring 2020 shows that Canadian real GDP will drop by 25 per cent in the second quarter. This will be the steepest quarterly decline in economic output on record, based on modern statistics that date back to 1961.
“Physical distancing requirements as well as the closure of non-essential businesses have brought a large portion of the economy to a standstill,” says Alicia Macdonald, Associate Director, Economic Forecasting, at The Conference Board of Canada. “As a result, every province has fallen into recession. Our forecast expects that the downturn will be short-lived and growth will resume in the second half of the year, assuming businesses slowly reopen over the spring and summer.”
The arrival of the COVID-19 pandemic has devastated the economic outlook for all provinces. Moreover, the collapse in oil prices is amplifying the economic hardship in the energy-producing provinces. The forecast for 2020 calls for a steep decline in economic growth in every province.
Some key findings:
- With GDP contracting in the first half of the year, the Canadian economy is on track to decline by 4.3 per cent in 2020.
- Newfoundland and Labrador is set to enter a recession this year, with its economy contracting by 3.8 per cent as the province deals with the decline in oil prices and sharp reductions in global and domestic demand.
- In Prince Edward Island, the economy will contract by 3.0 per cent in 2020, with the contraction in tourism activity a key driver of this outcome.
- The broad-based slowdown in global and domestic demand will see New Brunswick’s economy shrink by 3.3 per cent this year. This revision to our previous forecast is the smallest among all provinces, as health care makes up a larger than average share of the New Brunswick economy.
- Nova Scotia’s economy is forecast to contract 3.6 per cent this year. Both export-intensive and domestic-oriented industries are seeing a massive drop in demand due to the coronavirus pandemic.
- In an attempt to slow the spread of COVID-19, Quebec has shut down businesses deemed non-essential until at least May 4, 2020. With activity restricted and consumer and global demand falling, the province’s real GDP will decline 3.8 per cent this year. Buoyed by various income support programs, Quebec’s economy will bounce back next year, gaining 5.8 per cent.
- In Ontario, real GDP is forecast to decline by 3.2 per cent this year, one of the smallest declines among the provinces. A large concentration of professional service activities (which can be done remotely) and the retooling of some facilities to produce medical supplies are helping to lift the outlook for Ontario relative to other provinces.
- Manitoba’s economy is set to contract by 3.9 per cent this year as the impacts of COVID-19 reduce household spending and weigh on demand in key industries, such as transportation equipment manufacturing.
- Saskatchewan will experience one of the largest declines in output this year as the negative impacts of COVID are layered on top of the weakness in the province’s mining industry. Overall, the province is looking at a decline in real GDP of 5.0 per cent this year before rebounding by 5.4 per cent in 2021.
- Alberta is grappling not only with the impacts of COVID-19, but also with a severe contraction in oil prices resulting from the steep drop in global demand (due to the pandemic) and the price war between Russia and Saudi Arabia. We expect the economy to contract by 5.8 per cent in 2020, which would be the worst annual decline on record. Fortunately, the downturn will be temporary, and the economy will rebound with 6.1 per cent growth in 2021.
- British Columbia’s economy is projected to contract by 3.2 per cent this year. Some consumer-facing industries face a near-halt to activity while the slowdown in international trade is weighing on port and transportation activity.
Source: The Conference Board of Canada