It’s been happening so fast we haven’t yet had time to be astonished. So it is with the quickly unfolding coronavirus pandemic now sweeping through Europe and North America after first taking root in Asia. The unprecedented public health challenges stemming from the virus must remain at the heart of how governments respond. But the economic consequences also deserve the attention of policy-makers, including here in B.C.
The reality is that parts of our economy are shutting down, notably consumer-facing industries such as hospitality, entertainment and leisure, travel, and some segments of retail. Economy-wide spending is set to plunge as businesses curtail operations, many people practice “social distancing,” the tourism business collapses, and most consumers stop making discretionary purchases. This will rapidly lead to disappearing jobs and tens of thousands of financially destroyed companies across the province.
At the same time, global commodity prices have plummeted and foreign demand for Canadian products has dipped, putting added pressure on B.C.’s resource-centric export economy. The overall economic situation has suddenly become dire.
In this environment, the playbooks that normally guide decision-making no longer work. Governments, in particular, must step forward decisively as economic activity in the private sector contracts significantly in the coming weeks. The Bank of Canada has slashed its policy interest rate and is taking other steps to inject liquidity into the financial system. It will have more to do in the next month. The federal government’s economic package unveiled on March 18 will also help by providing extra cash to households and jobless workers and throwing a modest lifeline to some struggling firms.
What steps should B.C. be taking? Providing maximum support to the health system is job one. Beyond that, the province needs to set aside the budget presented by Finance Minister Carole James barely a month ago and develop a plan to mitigate the economic dislocation and slump that is already upon us, building on the measures announced by Ottawa. Dark times call for bold measures. This is not a moment when concerns over deficits or governments that spend too freely should be dictating action.
B.C., like Canada as a whole, faces an immediate, dramatic decline in economic activity, notably in consumer-facing industries, but extending to other sectors as well. Several hundred thousand jobs are at imminent risk, with the retail sector alone employing 300,000 British Columbians. Put simply, a major recession looms. I anticipate drops in monthly GDP in March, April and very probably May that will exceed anything experienced in previous post-war business cycles. It is unclear how long the downturn will last, but six to 12 months is a reasonable guess.
Against the backdrop of a tanking economy, the province should be taking steps to support the solvency and continued operations of businesses — for example, by rolling back taxes (including payroll and property taxes), offering tax deferments until 2021, halting the implementation of all new regulations that impose additional costs on the private sector, and working with Ottawa to backstop the balance sheets of viable companies.
Policy-makers should also look for ways to direct cash and other assistance to hard-pressed and vulnerable households and workers, including people whose main source of income derives from “gig” work. Communities dependent on one or two large employers will need support if these firms shut down. With the job market softening, many university and college students will struggle to find work this summer. Their situation should not be forgotten as B.C. develops its economic resiliency and recovery plan.
Over the next year, the province will need every dollar of extra GDP and every additional job it can squeeze out of a faltering economy. This calls for a major shift in the mindset and priorities of government officials, regulatory bodies and municipalities. Everything that can be done to facilitate and accelerate economic development and deliver on planned private-sector investment should be done.
Today is not a time for business as usual.
Jock Finlayson is the executive vice-president and chief policy officer at the Business Council of B.C.
As published by the Vancouver Sun.