TORONTO — There is reason for a little optimism if all goes according to plan. The Organisation for Economic Co-operation and Development sees improvement in global growth of 5% in 2021 if the virus remains contained and health measures are followed. The hope is consumer and business confidence will continue to grow and that would be supported by the government’s ability to help maintain jobs leading to an increase in demand for goods and services.
However, the wildcard continues to be the flare up of COVID-19 and should that happen you could see 2-3% removed from the growth projections.
The OECD sees Canada contracting this year by 5.8% and then experience growth of 4% in 2021. Assuming that happens, it will be good news for the economy and challenging news for some households.
While looking at the big picture there is little doubt the various relief measures put into place have helped to cushion the financial blow to economy and for Canadians. Government, banks and businesses have all combined to help families get by and support the economy. But that financial aid could be coming to an end as it appears to have done the job.
There is little doubt short term financial relief will end ultimately with the economy expected to start growing again, yet household finances have been destroyed. The financial relief provided to many has been a bandage and sadly when that bandage is ripped off it is going to hurt. According to MNP, 43% of Canadians are still experiencing disruption to their own work situation or a family member in the form of lay-offs, reduced pay or few working hours.
“Even in good times, many household budgets teeter on a knife-edge. We know that many don’t have enough emergency savings to cope. And though we’ve yet to see any concrete evidence Canadians have significantly increased their debt loads since March, there’s reason to think many will turn to credit when relief measures end,” explains Grant Bazian, president at MNP LTD.
Canadians may be forced to borrow at higher interest rates driven in part by the fear of being unable to make a rent payment. In fact, 16% say they would have to sell their home to make ends meet once the support comes to an end. While 21% are hoping to defer mortgage payments even further.
Our most financially vulnerable Canadians are going to be exposed when the benefits end while consumer proposals and bankruptcies will surely increase.
The pandemic has created uncertainty, chaos and heartbreak while at the same time masking the underlying debt problems of our most vulnerable Canadians. The good news of an economy that starts to grow again will hopefully help some families seek out additional income streams to provide some financial stability that is so desperately needed.