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

Just Posted

Métis communities make do with minimal financial aid from Trudeau; CBT offers support

Métis citizens in valley forged ahead thanks to support from local leadership and community groups

Furor erupts over CastleRock mountain bike trails

A petition has garnered 1,700 signatures so far and seeks to have the CastleRock trails legitimized.

Pedestrian-only main street?

A car-free, pedestrian-only main street in downtown Invermere could be a possibility this summer.

Radium’s beloved bighorn sheep herd on the decline

Advocates say safer streets needed

Flood evacuation in Fairmont; residents able to return home

Evacuation alerts remain in place for Fairmont Creek and Cold Spring Creek.

March dental conference key to many of B.C.’s COVID-19 cases

Early infections from China, Iran were quickly contained

MAP: Dr. Henry reveals which B.C. regions have seen most COVID-19 cases

B.C. health officials release a first look at how the novel coronavirus has reached all corners of the province

Tla-o-qui-aht First Nation woman, 26, fatally shot by police in Edmundston, N.B.

Police were conducting a well-being check at the time of the incident

Seniors to receive up to $500 in promised COVID-19 emergency aid in early July

The Liberal government first promised the extra help in mid-May, but had to create a new system to deliver the aid

Introducing the West Coast Traveller: A voyage of the mind

Top armchair travel content for Alaska, Yukon, BC, Alberta, Washington, Oregon and California!

VIDEO: Revelstoke bear wanders into Animal House pet store

Staff got ready to chase it out with a broom

Nelson counsellor works online with university students in central Asia during pandemic

Robin Higgins is home from her job in Tajikistan because of COVID-19

New study is first full list of species that only exist in Canada

Almost 40 per cent of them are critically imperilled or imperilled and eight are already extinct

Angel Flight takes flight from Creston after being grounded by COVID-19

Angel Flight is a volunteer-run organization which gives people flights to doctors appointments

Most Read