Canada’s Second COVID Lockdown

Canada’s Second COVID Lockdown

Over the weekend leading up to Christmas, it was reported that the Ontario Government would implement a provincial lockdown on Christmas Eve, which it then decided to delay until Boxing Day despite hospitals urging against the move. Since the end of November, COVID-related hospitalizations have increased 70%, with the Ontario Hospital Association stating that workers are overstretched.

How did we get here…again?

Government action has been disproportionate and inconsistent in addressing the spread of the virus, leading to many measures that only address issues partially. The Quarantine Act was implemented in late March and since mid-April it has been mandatory for individuals entering the country to quarantine for 14 days or face penalty. Individuals are checked on through the contact information provided at the border upon entrance. Now, nine months into the pandemic, those travelling to Canada will have to provide a negative test to be able to enter.

However, there are still five points of entry for Americans on their drive across Canada to Alaska, and only on July 31 were stricter measures introduced to ensure that Americans didn’t take advantage of the opportunity to sightsee and vacation in Canada. In addition to this, the Canada Border Services Agency estimated that more than 80% of arrivals to Canada were exempt from quarantining between March 31–November 12, as these individuals were deemed to be providing essential services. The exempt individuals began to be tracked on July 31, four months into the pandemic.

In addition to inconsistent health and safety measures, the approach applied to deciding which physical locations should be open and under what conditions has been similarly incoherent. In Ontario, intermediate measures taken for restaurants and similar food and drink locations included restricting indoor seating to 50 individuals, as opposed to amending this figure to be proportional to the size of the establishment. The same restriction level notes that food and drink establishments must close at 10pm, despite the risk that this would just encourage other forms of gathering and socializing instead. Despite limiting the number of individuals indoors in such establishments, the same rule does not apply when it comes to schools, which can remain open under the intermediate measures and include many more than 50 individuals indoors.

The mismanagement of the time period when infections were low over the summer months has made a hard lockdown necessary. The new lockdown measures in Ontario have been particularly harsh on small business owners as big box stores have been allowed to sell goods in store, while small businesses selling similar items have been prevented from providing the same service. This is estimated to severely impact the likelihood of survival of one third of Ontario’s small businesses, per the findings of the Canadian Federation of Independent Business.

Financial Impact and Severity

Canada’s approach to ensuring that individuals and business owners are adequately supported has been through financial assistance packages such as the Canada Emergency Rent Subsidy (CERS) and the Canada Emergency Wage Subsidy (CEWS). However, such measures do not appear to be sufficient given economic trends. Prior to the pandemic, unemployment in Canada was down to 5.6%, but the figure in November 2020 was 8.5% and in December it was forecast to reach 9.748%. Comparing this figure to the recession in 2008, peak unemployment in Canada reached 8.6%. Given that the pandemic has not yet reached an end point, it is likely that unemployment at the end of the pandemic will be much higher, especially since it reached a peak of 13.7% in May (the highest rate between 1976 and the present). At the same time, the issue is not just the increase in the unemployment rate but also the loss of wages that those who have been employed during the pandemic have experienced, which is not captured in this figure. We must consider these individuals as well as part of a growing group of citizens whose economic opportunity has diminished.

Partly as a response to this volatility, the Bank of Canada reduced interest rates to 0.25% until at least 2023, but Moody’s does not think this will be enough to save the housing market. Moody’s is anticipating that the real estate sector will lose momentum during the first half of 2021 with house prices predicted to decline 7% (per information available in September), as the sector catches up with the impact of labour market conditions including the rise of vacancies and delinquencies. As a result of the negative outlook within the Canadian market, the IMF is projecting a real GDP rate of -7.1% for year-end 2020, the lowest it has been from 1980 to the present day. Due to the combination of this series of negative outlooks, there is a realistic possibility that the pandemic may be one of the most – if not the most – economically significant events in recent Canadian history.

What Next?

The problem with the crisis right now is that health and safety measures are taken with a one-size-fits-all perspective when this is very clearly not adequate, and it is highly likely that meaningful amendments will not be made to address the gaps. It is a realistic possibility that the financial assistance packages may have been more effective if all parts of the current problem had been addressed to complement one another. The ineffective measures have stretched out the duration of the impact on citizens, which has led to deeper and longer lasting economic consequences.

There is a real possibility that the Canadian economy will continue to feel the burn of the pandemic for the next 3–5 years. This conservative prediction is based on the trickling impact that small business closures will have, as well as the issues of how the market will absorb the loss of wages and unemployed individuals and how quickly new businesses will be established to replace those that go bankrupt. It takes time for events to unfurl in response to an initial impact, making it highly likely that recovery will be a slow process.

Categories: Covid-19, North America

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