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1 ECONOMICS ESSAY

Economics Essay: The impact of COVID-19 on the Canadian economy Tao Zhou Wilfrid Laurier University EC281[Section J]: Writing and Presentation in Economics Professor Annette Abma July 31, 2020

2 ECONOMICS ESSAY Economics Essay: The impact of COVID-19 on the Canadian economy Introduction In the context of a severe and devastating pandemic, the world economy is expected to contract by 3.2 percent in 2020. The cumulative global loss of output in 2020 and 2021 (nearly $8.5 trillion) is expected to wipe out almost all of the output gains of the previous four years. Coronavirus has spread to almost every country in less than three months, and by the end of April 2020 more than 200,000 people had died from COVID-19. The global virus disaster we are experiencing has led to unprecedented health and economic crisis. In the absence of effective vaccines and treatments, most countries rely on measures of social distancing and stay-at-home strategy to slow the spread of the virus, but it has also paralyzed economic activity in the region (World Economic Situation and Prospects as of mid-2020, 2020). Canada, like almost every other country on earth, has put its economy in a coma as it tries to slow the spread of COVID-19. Schools, shops, restaurants, factories, and offices have all been closed, employees have to work from home, students have to study online from home, and many families are facing a serious economic crisis. Before there were cases of COVID-19 in Canada, the Canadian economy was not so good. Many households are burdened with heavy debt, exports are weak, and businesses are shrinking. In the fourth quarter of 2019, before Coronavirus began to spread, Canada's economy grew by just 0.3% (Jason Kirby April 6, 2020). Economists point out that Canada's GDP fell by 6.2%, far more than the 1% or more than the IMF shrank the country after the 2008 financial crisis, the biggest annual decline since 1921 (Lewis, 2020). The impact of the epidemic on Canada's economy has been threefold: a slump in oil prices, a sharp rise in the unemployment rate, and a slump in tourism.

3 ECONOMICS ESSAY Essential essay components With the rapid spread of COVID-19 around the world, demand for oil has fallen sharply, causing prices to plummet. On March 9th plunging oil prices caused a stir in Canada. The plunge in the oil market was the biggest one-day drop since the 1991 Gulf War as Saudi Arabia and Russia vowed to increase production after failing to reach an agreement to cut supplies to support prices. Eventually Brent crude, the global benchmark, briefly fell to around $31 US a barrel (Seskus, 2020). Canada's energy sector has been directly affected by the collapse in crude oil prices. Shares of manufacturers Suncor Energy Inc. and Canada's Natural Resources Ltd. fell 20% to 25% (Russell, 2020). Besides, COVID-19 is the main cause of drop-in oil prices. "We have a lot of oil but not enough demand and not enough storage tanks to store it," said Richard Mason, an energy expert and executive fellow at the University of Calgary's School of Public Policy. Because of the stay-at-home policy, people no longer travel by car or plane as often, and demand for oil has fallen sharply. Global demand for oil, which used to be about 100 million barrels a day, has fallen by about 30 million barrels a day as everyone stays home. The collapse in oil prices has been so severe that the WTI contract briefly fell to zero in April as traders frantically sold contracts to receive physical oil because of a lack of storage space. (Bench, 2020). The plunge in oil prices is sure to slow Canada's economic recovery. As a result of the outbreak, the Canadian government's stay-at-home strategy to slow the spread of COVID-19 has led to a sharp rise in unemployment in Canada. The total number of jobs lost during the outbreak exceeded 3 million, and the unemployment rate soared to 13 percent, according to Statistics Canada's Labor Force survey. The Government of Canada website shows 18.31 million people had applied for CERB as of 21 June 2020 (Canada, 2020). Since comparable data became available in 1976, the COVID-19 unemployment rate is second

4 ECONOMICS ESSAY only to the lowest ever recorded in December 1982 (2020). Behind these numbers lie the realities of financial hardship facing millions of families. Many people have lost their jobs as a result of the epidemic, and families have lost their source of income. The world is facing serious health safety and economic problems, everyone is staying at home, and Canada's tourism industry has been hit hard. Marion Joppe, a professor at the University of Guelph's School of Hotel, Food and Tourism Management, said Canada receives thousands of Chinese tourists every year, but with the global epidemic at risk, no one would risk infection to travel. China has imposed very strict travel and travel restrictions on its citizens, while Canada only allows PR, Canadian citizens, and US citizens to enter the country. Air Canada has canceled or postponed flights across Canada and China. In the context of a pandemic, everyone is not immune, so national regulations must be strictly observed. Conclusion Canada and the rest of the world are torn between saving lives and saving the economy, both of which need to be saved. The speed and sequence of recovery from the crisis will largely depend on the effectiveness of public health and fiscal measures. The Canadian government needs to clean up the virus, reduce the risk of another outbreak, protect jobs and incomes, and restore consumer information.

5 ECONOMICS ESSAY Reference Canada lost nearly 2 million jobs in April amid COVID-19 crisis: Statistics Canada | CBC News. (2020, May 08). Retrieved June 27, 2020, from https://www.cbc.ca/news/business/canada-jobs-april-1.5561001 Canada, S. (2020, June 23). Government of Canada. Retrieved June 27, 2020, from https://www.canada.ca/en/services/benefits/ei/claims-report.html Bench, A. (2020, April 21). Oil prices are in the negative: COVID-19 rules to stay home played a huge part. Retrieved June 27, 2020, from https://globalnews.ca/news/6844391/coronavirus-oil-prices-stay-home-rules/ Coronavirus just beginning to hurt Canadian economy, experts say | CBC News. (2020, February 19). Retrieved June 27, 2020, from https://www.cbc.ca/news/canada/toronto/coronavirusbusiness-impacts-canadian-economy-1.5468020 Lewis, M. (2020, April 14). Canadian economy to take massive hit from COVID-19 and oil – will see largest contraction since 1921. Retrieved June 26, 2020, from https://www.thestar.com/business/2020/04/14/canadian-economy-to-take-massive-hitfrom-covid-19-and-oil-will-see-largest-contraction-since-1921.html Jason Kirby April 6, 2. (2020, April 07). Coronavirus plunges Canada's economy into the abyss. Retrieved June 27, 2020, from https://www.macleans.ca/economy/economicanalysis/coronavirus-plunges-canadaseconomy-into-the-abyss/ Russell, E. (2020, March 10). What the oil plunge means for Canada and Alberta. Retrieved June 27, 2020, from https://globalnews.ca/news/6649905/oil-price-plunge-impact-canadaalberta/

6 ECONOMICS ESSAY Seskus, T. (2020, March 12). Crude price plummet raises spectre of spending cuts, job losses in Canadian oilpatch | CBC News. Retrieved June 27, 2020, from https://www.cbc.ca/news/business/canadian-oilpatch-price-plunge-1.5491173 World Economic Situation and Prospects as of mid-2020 | Department of Economic and Social Affairs. (n.d.). Retrieved May 20, 2020, from https://www.un.org/development/desa/dpad/publication/world-economic-situation-andprospects-as-of-mid-2020/...