Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: Economic impact of COVID-19 will be enormous and difficult to estimate

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

The economic impact of the COVID-19 virus will be both enormous and difficult to estimate. To begin with, the entire world is catapulting into recession as governments scramble to contain the pandemic and international trade and travel shrivel. For B.C., this means reduced foreign demand for the goods and services we sell abroad and lower prices for many of our exports.

At the same time, the government’s decision to shutter of much of the consumer-facing services economy – including most retail businesses — is unprecedented. International air travel has essentially halted, delivering a blow to B.C.’s tourism industry just weeks before business normally would be expected to surge. Global supply chains for manufactured and advanced technology products have also been disrupted, hurting many local companies.

READ MORE: COVID-19 has been impacting Canadian economy since January

Amid the chaos, the Business Council recently modelled how the COVID-19 crisis and the measures being taken to manage it may affect the province’s economy in the months ahead. In doing so, we looked back at B.C.’s experience during the 2009 recession to get some sense of how sharp drops in consumer spending, investment and exports could impact various industries.

Using a bottom-up, industry-by-industry analysis, our base case forecast is that the province’s economy will contract by around 7% in 2020. That is roughly two-and-a-half times greater than the economic decline recorded in 2009. Most of the fall-off in economic activity will be concentrated in the March to June period, but some negative consequences are likely to linger into the summer and fall.

In developing this estimate, we assumed that much of the private sector service economy will remain closed for at least eight weeks. When shuttered businesses re-open, some restrictions likely will continue to apply. Bars, restaurants and other retail outlets may have new social-distancing rules, for example. And international air travel won’t be returning to “normal” for many months, in part because health officials will want to minimize the risk that the virus could be re-introduced to the population by visitors from elsewhere.

Which B.C. industries will suffer most from the toxic combination of a world-wide recession and the aggressive domestic measures being taken to contain the coronavirus?

Hardest hit will be air transportation, accommodation, restaurants and pubs, entertainment and leisure venues, film and television production, and other parts of the retail sector that are no longer operating (such as department, clothing and book stores). B.C.’s important tourism sector stands to be hammered over the next few months. Plenty of pain will also be felt in home-building, real estate, manufacturing, and business and professional services.

The current situation is extraordinary, and governments across the country are acting to shore up the quickly unraveling economy. Most of these efforts involve supporting workers and families experiencing job and income losses. That makes sense. But the plight of businesses cannot be ignored. If tens of thousands of B.C. companies are rendered insolvent in the face of collapsing revenues, the hard reality is that many furloughed workers won’t have jobs to return to. In addition, widespread business failures may destroy some of the economy’s productive capacity, notably in critical export sectors– with lasting negative implications for our prosperity.

In the past month, the federal and B.C. governments have announced a flurry of initiatives to support business, including a temporary wage subsidy program, tax deferrals, a concessionary lending program for small businesses, and a one-year reduction in B.C.’s school property tax for commercial and industrial businesses. At the same time, the Bank of Canada and federal financial authorities are moving to ensure the ongoing flow of credit to the private sector.

These are all positive steps. But more will be needed if policy-makers want to prevent the disappearance of large numbers of enterprises and the jobs they sustain. Canada should be looking at the bold measures adopted in Germany, Australia and the U.K. to backstop their business sectors – including major exporters — during the COVID-19 episode. The goal should be to enable companies that were commercially viable before the onset of the crisis to “bridge” the next 2-3 months until the worst of the pandemic — hopefully — is behind us.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Like us on Facebook and follow us on Twitter

B.C. Budget 2020

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Unofficial holidays: Here’s what people are celebrating for the week of Sept. 27 to Oct. 3

World Farm Animals Day, Drink Beer Day and Virus Appreciation Day are all coming up this week

Conservation Officers seek public assistance

A mule deer buck was poached within Elkford town limits

Two new COVID-19 cases reported in Interior Health

The total number of Interior Health cases since the beginning of the pandemic is now at 522

Editorial – Voters think little of political opportunism

John Horgan is playing a very cynical game with his own government’s health message

Annual Elk Valley Pride Festival paints the town rainbow

Festivities began with a spirited Pride Bike Parade and flag raising ceremony

QUIZ: Do you know what’s on TV?

Fall is normally the time when new television shows are released

End of CERB means uncertainty for some, new system for others

As of a week ago, the CERB had paid out $79.3 billion to 8.8 million people

Horgan, Wilkinson trade barbs over MSP premiums, health care at campaign stops

Horgan called a snap election for Oct. 24 earlier this week

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

PHOTOS: 2nd calf in a month confirmed among Southern Resident killer whale pod

Center for Whale Research said they will eagerly await to observe the calf to evaluate its health

2 British Columbians arrested, 3 at large in massive Alberta drug bust

Eight people are facing 33 charges in what police have dubbed Project Incumbent

97 distressed horses, cats and dogs seized from farm in Princeton

RCMP assisted as BC SPCA executed search warrant

$250K reward offered as investigation continues into Sea to Sky Gondola vandalism

Police also asking for specific footage of Sea to Sky highway around time of incident

Most Read