Canada recently passed an unprecedented relief package designed to minimize the impact of the COVID-19 pandemic. Royal assent of the legislation worth $107 billion was followed by a dramatic rise in unemployment benefits claims.
While no economy is expected to fare particularly well in the coming months, Canada is more prepared and less affected than many other nations.
That’s thanks in part to the early implementation of a travel ban. Canada took decisive action to shut its borders at an earlier stage than any other first-world nation, owing largely to the country’s ability to analyze the effectiveness of measures taken by other countries much further along the infection curve.
Data shows Canada trailing the United Kingdom and other European countries, quite significantly, in terms of confirmed cases, deaths, cases in critical condition, and an infection rate per million people.
Compare this to the United Kingdom’s rates and it’s clear that Canada has valuable days and weeks to learn from the actions of other first-world countries. This is a huge advantage for the Canadian government and people.
And beyond the travel ban implementation, the early start is giving Canada’s leaders valuable insights into what economic measures do and don’t work.
We’ve witnessed this both in the government’s direct cash stimulus offer to the Canadian people and the announcement by Canadian banks that they will offer mortgage payment relief to those previously in good standing.
In the United Kingdom, Chancellor of the Exchequer Rishi Sunak announced sweeping measures to protect British workers by offering every employed person 80 per cent of their monthly salary up to a value of £2,500 (about C$4,300).
The United States Congress, meanwhile, has repeatedly bickered over legislation that would offer American citizens relief.
Canada saw these two directions and chose to offer citizens a monthly stipend of $2,000. This was a wise decision.
The move by Canadian banks to offer an indefinite period of mortgage repayment relief is also both welcome and wise. Canada’s big banks all announced that anyone could apply for repayment deferrals on mortgages, with additional interest on owed sums being added to monthly repayments once they resume. It mirrors a move pushed by the Financial Conduct Authority (FCA) in the United Kingdom, which told lenders they must offer three-month payment holidays for U.K. homeowners.
Canada is likely to face much of the same challenges as Italy, the United Kingdom and even the United States. In just one recent week, more than one million Canadian workers filed for unemployment benefits.
However, with the borders under control, social distancing measures in place and the ability to build on learned experience from overseas, the government, banks and major employers have the best possible chance to minimize the impact the virus has on the economy.
Canada also has the added benefit of testing kits, including antibody tests that identify those who have already suffered asymptomatically, being available before the country gets close to peak infection rates. And the federal government, along with various provincial governments, are expediting orders of new diagnostic tests that speed up testing of patients.
Canada is extremely well-positioned to handle this pandemic more efficiently than much of Europe.
Nonetheless, the Royal Bank predicts the economy will contract in the second and third quarters of the year, initially by 2.5 per cent and later by 0.8 per cent. With businesses closing and millions out of work, uncomfortable action must be taken by the government now – and while it’s far from ideal, the government is in the best possible position to do so.
Canada has a world of economies to look to and learn from, not just in Europe but in the United States.
Continuous cash aid to Canadian citizens, mortgage relief and closed borders are signs the government is acting responsibly. But more could still be done by lenders.
The Canadian government doesn’t have much of an excuse to get this wrong.