Canada is set to endure “one of the worst recessions in its history,” and some provinces will fare worse than others, according to a report from Desjardins.
Recovering from the economic turmoil wrought by Covid-19 “will be slow and gradual,” the report predicted, with real GDP expected to plunge by 12% in the second quarter and 5.9% for the year. Earlier this week, CIBC forecasted that GDP would fall 6.2% in 2020.
The Desjardins report said the rebound isn’t expected to begin until the third quarter — but rebounding may prove difficult for some provinces.
“Alberta and Saskatchewan entered Covid-19 on their knees,” the report said, noting that they were the only provinces in the country to see real GDP decline in 2019.
In addition to grappling with persistently low oil prices, both provinces have borne the brunt of a substantial drop-off in the manufacturing and construction sectors. Alberta saw its unemployment rate more than double from 7.2% in February to 15.5% in May.
Unemployment in Quebec — a province that “saw more upheaval than elsewhere in the country” — skyrocketed to 17% in April, but that province is already showing signs of recovery, the report noted.
Quebec, which began reopening its economy ahead of other provinces, saw unemployment drop to 13.7% in May.
“The labour market will continue to recover in step with the phases in lifting the lockdown,” the report said.
It may be a tougher slog for Ontario, which has been slower to reopen than most provinces and has had several restrictive measures extended.
“Ontario is thus the only province not to see the number of jobs increase in May; it was also the only province to see the actual number of hours worked decline again that month,” the report stated, noting that the auto sector has been particularly hard hit.
British Columbia and Manitoba, meanwhile, have remained relatively insulated from the worst of the pandemic’s economic effects.
“Actual hours worked retreated less between February and April, particularly in Manitoba,” the report said. “In British Columbia, homebuilding remains relatively strong, as shown by the recent advance by housing starts.”
The two provinces are expected to see real GDP decline less than the national average.
Newfoundland and Labrador was “especially hard hit by the decline in hours worked,” but other parts of Atlantic Canada have been less affected, and the daily number of new Covid-19 cases “has almost fallen to zero in Nova Scotia and Prince Edward Island,” the report noted.
In anticipating Canada’s eventual rebound, Desjardins cautioned that a second wave of Covid-19 “would further hobble economic growth.”
“The adverse effects on corporate earnings and the stock markets would be more severe as a result and the risk of a financial crisis would increase,” the report warned.