host: pedro antunes...source: imf staff analysis, updated as of may 13, 2020 ... activities slowly...
TRANSCRIPT
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.
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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
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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
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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
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…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
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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
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Taking the net worth perspective: Canada
Scenario Size of fiscal
response
Share of 2019
GDP
Lower
estimate
CAD$108 billion 4.7%
Central
estimate
CAD$144 billion 6.3%
Upper
estimate
CAD$180 billion 7.8%
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
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Q&A
How Canada RecoversWhere are we and where are we going?
17
Alicia MacdonaldAssociate Director
The Conference Board of Canada
Todd CrawfordAssociate Director
The Conference Board of Canada
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%
Sources: Statistics Canada; The Conference Board of Canada.
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
Sources: Statistics Canada; The Conference Board of Canada.
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
Sources: Statistics Canada; The Conference Board of Canada.
-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
Sources: Statistics Canada; The Conference Board of Canada.
-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
Sources: Statistics Canada; The Conference Board of Canada.
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
Sources: Statistics Canada; The Conference Board of Canada.
-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
Sources: Statistics Canada; The Conference Board of Canada.
-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
Sources: Statistics Canada; The Conference Board of Canada.
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
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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