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Canada Facing Record Economic Downturn

Written by Judy McKinnon, the News Desk

Published on April 13, 2020

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As the COVID-19 pandemic continues to unfold globally, uncertainties about the economic impact the health crisis will leave behind are mounting. While there is no clear picture yet on how long the challenging conditions will last, recent government statistics and economist projections are beginning to offer some insight into the bumpy road ahead for many.

According to RBC Economics, 2020 will be a year for the record books.

"Canada is likely headed for the deepest economic downturn on record (going back to 1961). The hit to the economy was quick and powerful," RBC Economics says in a new report titled A Downturn Like No Other.

The speed and force of the impact is evident in the latest Canadian employment numbers. More than 1 million jobs were lost in March and the unemployment rate jumped to 7.8 per cent as non-essential businesses shuttered across Canada, data showed. The unemployment rate was up 2.2 percentage points from February, marking the biggest one-month increase since the data started to be compiled in 1976, Statistics Canada reported.

The job losses in the month of March alone were more than twice the total job losses in the 2008/09 global financial crisis, RBC Economics said in a separate report analyzing the latest employment numbers. It expects the decline in April could be "multiples of this March drop." Its current forecast puts Canada's unemployment rate at around 14.5 per cent in the second quarter ending in June, before improving to closer to 8 per cent by the end of 2020.

For the economy as a whole, RBC Economics is projecting real gross domestic product (GDP) to fall by almost 5 per cent this year as a return to normal for Canadians will be a gradual process. It expects the hit to the current quarter will be significant, with real GDP projected to contract at a more than 30 per cent annualized pace.

"Easing social distancing measures will alleviate some of the stress in the economy, although persistently low oil prices will continue to weigh on growth," RBC Economics reports. Oil prices, it notes, are down US$35 since the start of the year and are expected to average US$31 in 2020, which is about half of the average price in 2019.

So, what does the big picture look like for the economy?

"It appears likely that measures to contain the coronavirus will be unwound gradually, pointing to a similarly gradual return of economic activity. This points to the recovery looking U-shaped rather than V-shaped," RBC Economics says.

Read the full report here. 

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