If social distancing continues for several months, the cost to the economy and labour force would be sizeable.
That’s according to a new alternate scenario forecast from the Conference Board of Canada which looks at the impact of social distancing continuing until the end of August in both Canada and the United States.
It concludes that, rather than its baseline scenario of 0.3% growth in Canada’s real GDP this year, there would be a 1.1% contraction. Job losses would be more than 330,000 over the second and third quarters, and unemployment would rise to 7.7%.
“These are extraordinary times. Canadian leaders, business owners and households are facing unprecedented uncertainty, said Pedro Antunes, Chief Economist at The Conference Board of Canada. “If this scenario holds true, we can expect a deeper and longer-lasting hit to the Canadian economy. Still, governments have acted swiftly to mitigate health and economic impacts, once COVID-19 is contained, the economy will rebound.”
Assuming a consumer-led recession in the US, with real GDP also down 1.1%, the diminished demand from Canada’s most important trading partner means real exports of goods and services would decline by 2.1% in 2020.