host: pedro antunes...source: imf staff analysis, updated as of may 13, 2020 ... activities slowly...

Host: Pedro AntunesChief Economist

The Conference Board of Canada

Sponsored by:

© ACCA

What the pandemic is doing to the global economyand how governments are responding

Michael Taylor

Chief Economist

ACCA

Alex Metcalfe

Head of Public Sector Policy

ACCA

© ACCA PUBLIC

Our global reach

in numbers

219,000 membersand527,000studentsin 179 countries

67,000 public sector member and students around the world

110offices and centresin 52 countries

Over 100 years’ of working with governments to support better PFM.

© ACCA

A profile of economic recovery

16,000

16,500

17,000

17,500

18,000

18,500

19,000

19,500

20,000

2018Q4 2019Q2 2019Q4 2020Q2 2020Q4 2021Q2 2021Q4 2022Q2 2022Q4

A recovery pathReal US GDP level quarterly - CBO projections

2019 Q4 2022 Q3

$bn (real, 2012)

Source: US Congressional Budget Office May 2020

© ACCA

Households have plenty of spending power

0

5

10

15

20

25

30

35

Apr-90 Apr-92 Apr-94 Apr-96 Apr-98 Apr-00 Apr-02 Apr-04 Apr-06 Apr-08 Apr-10 Apr-12 Apr-14 Apr-16 Apr-18 Apr-20

US personal savings rate

%

Source: US Bureau of Economic Analysis

© ACCA

Government debt is rising sharply

90

95

100

105

110

115

120

125

130

30

35

40

45

50

55

60

65

70

2012 2013 2014 2015 2016 2017 2018 2019 2020f

Gross Government Debt % of GDP

Emerging markets exc oil producersOil ProducersAdvanced Economies (RHS)

Source: IMF Fiscal Monitor April 2020

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Debt servicing costs are very low…..

-2

0

2

4

6

8

10

12

14

Jan-90 Jan-92 Jan-94 Jan-96 Jan-98 Jan-00 Jan-02 Jan-04 Jan-06 Jan-08 Jan-10 Jan-12 Jan-14 Jan-16 Jan-18 Jan-20

Government bond yields decline10-year, selected countries

US Germany UK Japan

Source: Federal Reserve Bank of St Louis

© ACCA

…but not for Emerging Markets

0

100

200

300

400

500

600

700

800

Jan-17 May-17 Sep-17 Jan-18 May-18 Sep-18 Jan-19 May-19 Sep-19 Jan-20 May-20

Emerging Market Soveriegn Interest Rate SpreadsBasis points (bps) over US Treasury yields

Source: World Bank June 2020

bps

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An unprecedented fiscal intervention

▪ A global fiscal response of $9tn

▪ Above the line (eg, transfers to firms

and households, additional health care

spend): $4.4tn

▪ Below the line (loan guarantees, equity

injections, convertible loans): $4.6tn

Figure: Announced fiscal measures in G20 countries

Source: IMF staff analysis, updated as of May 13, 2020

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It’s time to drop debt-to-GDP ratios…

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… and focus on public sector net worth

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Benefits of the net worth perspective

▪ Transparency and facilitating public scrutiny

▪ Fiscal credibility

▪ Achieving value for money

▪ Managing assets & accounting for the

maintenance backlog

▪ Managing liabilities & identifying fiscal risks

▪ Reducing fiscal illusions & perverse incentives

▪ Supporting long-term thinking

© ACCA

Reducing fiscal illusions

Identifying fiscal illusions

▪ Accounting boundary

▪ Timing of payments

▪ Classification and recognition

▪ Reducing net worth (eg, sale of assets)

Recommendation: produce a fully consolidated

public sector balance sheet

Figure: UK WGA 2017–18 PSND to total WGA net liabilities

© ACCA

Taking the net worth perspective: Canada

Scenario Size of fiscal

response

Share of 2019

GDP

Lower

estimate

CAD$108 billion 4.7%

Central

estimate


Upper

estimate


Figure: Projections for the Canadian government's net worth as a share of GDPIn 2019, Canada had:

• Gross liabilities: 87% of GDP

• Financial & produced assets of 92% of GDP.

Table: Scenarios for Canada’s fiscal response to the pandemic

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From bridging the gap to big strategic choices

© ACCA

Q&A

How Canada RecoversWhere are we and where are we going?

17

Alicia MacdonaldAssociate Director


Todd CrawfordAssociate Director


The Economic Outlook:

A Recession Like No Other

Alicia Macdonald and Todd Crawford, Associate Directors Economic Forecasting

June 11, 2020

Canadian Economy: Where are we now and where are we headed?

Will COVID-19 have lasting impacts on our economy?

What does the recovery look like?

The damage from the shutdowns.

3 Million Jobs Lost in March & Aprilyear-over-year employment gains, thousands

20

Sources: Statistics Canada; The Conference Board of Canada.

-3,000

-2,500

-2,000

-1,500

-1,000

-500

0

500

1,000

Impacts of Job Losses

• Unemployment rate at 13.0 per cent in April.

• Employment rate plunged to 52.1 per cent.

• Uneven socioeconomic impacts:• Job losses disproportionately impacting lower wage earners, non-

unionized employees, recent immigrants and youth.

• Number of single parents unemployed has increased by over 50 per cent in the past two months.

21

March Real GDP by Industrymonth-over-month percent change

22

Hardest Hit

• Clothing Stores: down 52%

• Performing arts and sports: down 47%

• Air transportation: down 41%

• Restaurants and bars: down 40%

• Motor vehicle dealerships: down 39%

Thriving

• Grocery stores: up 15%

• Investment services: up 5%

• Health and personal care: up 5%

• Rail transportation: up 4%

• Forestry and logging: up 4%


What does the recovery depend on and what will it look like?

23

Government supports

Consumer and business sentiment

Pace at which restrictions are eased

Reaction to a second wave

What does the recovery depend on and what will it look like?

Federal Fiscal Measures

• Federal Government has announced cumulative measures of $235 billion amounting to 10.2 per cent of GDP

• $146 billion in direct support to workers and businesses including

➢ $73 billion Canada Emergency Wage Subsidy

➢ $35 billion in Canada Emergency Response Benefit

➢ $13.8 billion for Canada Emergency Business Account incentive

➢ $5.5 billion enhanced GST credit

• $85 billion to meet the liquidity needs of business and households through tax deferrals—taxes deferred to August and student loan payments deferred for 6 month no interest

• $4.4 billion for public health and safety measures and supplied

24

Consumer Confidence Hit a Record Low Index, 2014 = 100

25

Source: The Conference Board of Canada.

40

50

60

70

80

90

100

110

120

130

140

CFIB Business Barometer Index

26

Source: CFIB

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0

80.0

Assumptions for Reopening

27

Phase 1: mid

March – April- All non-essential businesses

closed.

- Borders closed to international

travelers.

- Manufacturing shuttered aside

from essential items.

- Some industries experience a

near-total collapse in activity.

- Construction activity forced to

stop in some provinces.

Phase 2:

May – August- Non-essential businesses

gradually reopen over the

summer.

- Household discretionary

spending remains negatively

affected.

- Borders remain shut to personal

travel → tourism industries

continue to face hardship.

- Businesses quickly rehire due to

the federal wage subsidy

Phase 3:

Sept. - June- Most aspects of the economy

return to normal operations.

- Border’s reopen but volumes

remain well below pre-crisis

levels.

- Cultural events and recreation

activities slowly resume.

85.0

87.0

89.0

91.0

93.0

95.0

97.0

99.0

101.0

1st 2nd 3rd 4th 5th 6th 7th 8th

2008-09 Recession

Sharp, Deep, UnprecedentedQuarterly recession pattern, Canada’s real GDP, indexed to 2008Q3 = 100, and 2019Q4=100

28


16,000

16,500

17,000

17,500

18,000

18,500

19,000

19,500

Labour Market to Start Recovering in May/Juneemployment, 000’s

29


-12.0

-8.0

-4.0

0.0

4.0

8.0

12.0

16.0

20.0

2011 12 13 14 15 16 17 18 19 20f 21f

Real after tax income Real spending

Household Spending Had Been a Pillar of Growthreal consumer spending, per cent change

30


-16.0

-12.0

-8.0

-4.0

0.0

4.0

8.0

03 04 05 06 07 08 09 10 11 12 13 14 15 16 17 18 19 20f 21f

Exports of Goods and Services Down SharplyReal export volumes, per cent change

31


Government Debt Levels SwellFederal and provincial government liabilities as a share of GDP, per cent

32

0.50

0.55

0.60

0.65

0.70

0.75

0.80

0.85

0.90

0.9519

90

Q1

91

Q1

92

Q1

93

Q1

94

Q1

95

Q1

96

Q1

97

Q1

98

Q1

99

Q1

20

00

Q1

01

Q1

02

Q1

03

Q1

04

Q1

05

Q1

06

Q1

07

Q1

08

Q1

09

Q1

20

10

Q1

11

Q1

12

Q1

13

Q1

14

Q1

15

Q1

16

Q1

17

Q1

18

Q1

19

Q1

20

Q1

f

21

Q1

f


-2.0

-1.0

0.0

1.0

2.0

3.0

4.0

5.0

Overnight rate Inflation

Subdued Inflation Keeps Interest Rates Low(overnight rate, per cent; inflation year-over-year percentage change)

33


-9.0-8.0-7.0-6.0-5.0-4.0-3.0-2.0-1.00.01.02.03.04.05.06.0

GDP PlummetsCanada’s real GDP, per cent change

34


The Bottom Line…

• Economic recovery over the second half of 2020 depends on our success (in Canada and the United States) at containing the outbreak.

• A re-emergence of rising COVID-19 cases with extended social distancing measures poses a risk to near-term recovery.

• Still, recovery is drawn out as social distancing restrictions are eased not dropped.

• Government borrowing and liquidity measures will support income in the short term.

• Canada’s tourism and energy sectors will suffer for longer.

35

How might COVID-19 change the world…

• Using technology for education, doctor visits, telecommuting.

• Permanent boost to online sales and the digital economy.

• Supply chains shortened—kept within the domestic economy.

• Deeper debt for households, governments and businesses.

36

A new kind of economic recovery

Kristelle Audet

June 11, 2020

What is the current crisis teaching us?

• The focus on purely economic indicators over the past few decades led to significant costs in terms of people’s health (stress, anxiety, depression), society (increased inequality) and the environment (climate change, reduced biodiversity, etc.)

• The COVID-19 pandemic is highlighting the fact that people’s health and lives are more important than economic growth at all cost

• When faced with a crisis, individuals, organizations and governments are able to quickly adapt and change their behaviour

38

Quotes from an Op-Ed published by the World Economic Forum (April 2, 2020)

“Crises like these offer an opportunity for a regained sense of shared humanity, in which people realize what matters most: the health and safety of their loved ones, and by extension the health and safety of their community, country and fellow global citizens.”

“When we eventually overcome the COVID-19 pandemic, we can hopefully hold on to that sense of shared humanity in order to rebuild our social and economic systems to make them better, more resilient, and compassionate.”

https://www.weforum.org/agenda/2020/04/climate-change-coronavirus-linked/39

https://www.weforum.org/agenda/2020/04/climate-change-coronavirus-linked/

Post-COVID-19Building a recovery on solid ground

40

Peoples’

Health

Society &

Culture

Economy

Environment

Source: The Conference Board of Canada.

▪ The economy shouldn’t be

viewed as a mean to an end

▪ Rather it can be a mean to

achieve successful

outcomes in terms of

people’s health, society &

culture, and the

environment.

Measuring Innovation in Canada

The Need for a Capability-Centred Innovation Framework

Darren Gresch

June 11, 2020

4242

Why

innovation?

How we’ve measured innovation in the past

43

• A benchmark of Canada’s innovation performance against 15 peer countries

• Measures how well Canada is meeting its fundamental goal of creating a high and sustainable quality of life for all Canadians.

44

Capability-Centred

Innovation Framework

Progress to date

45

• Interviewed a variety of experts (e.g., funding advisors, entrepreneurs, patent lawyers)

• Ongoing survey for businesses

• Using survey data, develop a framework to profile the innovation performance of firms

• Policy makers and funders can use it to inform funding and program decisions• Businesses will be able to adjust their practices and capabilities in response

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host: pedro antunes...source: imf staff analysis, updated as of may 13, 2020 ... activities slowly...

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