Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC. (Submitted)

COLUMN: Economic impact of COVID-19 will be enormous and difficult to estimate

Jock Finlayson is executive vice president and chief policy officer of the Business Council of BC

The economic impact of the COVID-19 virus will be both enormous and difficult to estimate. To begin with, the entire world is catapulting into recession as governments scramble to contain the pandemic and international trade and travel shrivel. For B.C., this means reduced foreign demand for the goods and services we sell abroad and lower prices for many of our exports.

At the same time, the government’s decision to shutter of much of the consumer-facing services economy – including most retail businesses — is unprecedented. International air travel has essentially halted, delivering a blow to B.C.’s tourism industry just weeks before business normally would be expected to surge. Global supply chains for manufactured and advanced technology products have also been disrupted, hurting many local companies.

READ MORE: COVID-19 has been impacting Canadian economy since January

Amid the chaos, the Business Council recently modelled how the COVID-19 crisis and the measures being taken to manage it may affect the province’s economy in the months ahead. In doing so, we looked back at B.C.’s experience during the 2009 recession to get some sense of how sharp drops in consumer spending, investment and exports could impact various industries.

Using a bottom-up, industry-by-industry analysis, our base case forecast is that the province’s economy will contract by around 7% in 2020. That is roughly two-and-a-half times greater than the economic decline recorded in 2009. Most of the fall-off in economic activity will be concentrated in the March to June period, but some negative consequences are likely to linger into the summer and fall.

In developing this estimate, we assumed that much of the private sector service economy will remain closed for at least eight weeks. When shuttered businesses re-open, some restrictions likely will continue to apply. Bars, restaurants and other retail outlets may have new social-distancing rules, for example. And international air travel won’t be returning to “normal” for many months, in part because health officials will want to minimize the risk that the virus could be re-introduced to the population by visitors from elsewhere.

Which B.C. industries will suffer most from the toxic combination of a world-wide recession and the aggressive domestic measures being taken to contain the coronavirus?

Hardest hit will be air transportation, accommodation, restaurants and pubs, entertainment and leisure venues, film and television production, and other parts of the retail sector that are no longer operating (such as department, clothing and book stores). B.C.’s important tourism sector stands to be hammered over the next few months. Plenty of pain will also be felt in home-building, real estate, manufacturing, and business and professional services.

The current situation is extraordinary, and governments across the country are acting to shore up the quickly unraveling economy. Most of these efforts involve supporting workers and families experiencing job and income losses. That makes sense. But the plight of businesses cannot be ignored. If tens of thousands of B.C. companies are rendered insolvent in the face of collapsing revenues, the hard reality is that many furloughed workers won’t have jobs to return to. In addition, widespread business failures may destroy some of the economy’s productive capacity, notably in critical export sectors– with lasting negative implications for our prosperity.

In the past month, the federal and B.C. governments have announced a flurry of initiatives to support business, including a temporary wage subsidy program, tax deferrals, a concessionary lending program for small businesses, and a one-year reduction in B.C.’s school property tax for commercial and industrial businesses. At the same time, the Bank of Canada and federal financial authorities are moving to ensure the ongoing flow of credit to the private sector.

These are all positive steps. But more will be needed if policy-makers want to prevent the disappearance of large numbers of enterprises and the jobs they sustain. Canada should be looking at the bold measures adopted in Germany, Australia and the U.K. to backstop their business sectors – including major exporters — during the COVID-19 episode. The goal should be to enable companies that were commercially viable before the onset of the crisis to “bridge” the next 2-3 months until the worst of the pandemic — hopefully — is behind us.

Jock Finlayson is executive vice president and chief policy officer of the Business Council of British Columbia

Like us on Facebook and follow us on Twitter

B.C. Budget 2020

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

U.S. Senator Bernie Sanders sits in on a COVID-19 briefing with Dr. Bonnie Henry, provincial health officer, and Adrian Dix, B.C. minister of health. (Birinder Narang/Twitter)
PHOTOS: Bernie Sanders visits B.C. landmarks through the magic of photo editing

Residents jump on viral trend of photoshopping U.S. senator into images

The COVID-19 outbreak at the two Coastal GasLink workforce lodges has officially been declared over. (Lakes District News file photo)
COVID-19 outbreak at Coastal GasLink worksites declared over

In total, 56 cases were associated with the outbreak in the Burns Lake and Nechako LHAs

Brett Alexander Jones is wanted on several warrants province-wide, in connection with multiple charges. Jan. 21, 2021. Kitimat RCMP photo
Kitimat RCMP searching for man wanted on several warrants province-wide

Jones is described as a five-foot 10-inches Caucasian man, with blond hair and blue eyes.

That’s Houston physician Dr. Stefanie Steel receiving her first dose of the Pfizer vaccine Jan. 19, 2021 from RN nurse manager Cindy Cockle. (Northern Health photo)
First Houston vaccinations take place

Long term care residents, health care workers on list

U.S. Senator Bernie Sanders sits in on a COVID-19 briefing with Dr. Bonnie Henry, provincial health officer, and Adrian Dix, B.C. minister of health. (Birinder Narang/Twitter)
PHOTOS: Bernie Sanders visits B.C. landmarks through the magic of photo editing

Residents jump on viral trend of photoshopping U.S. senator into images

A 75-year-old aircraft has been languishing in a parking lot on the campus of the University of the Fraser Valley, but will soon be moved to the B.C. Aviation Museum. (Paul Henderson/ Chilliwack Progress)
Vintage military aircraft moving from Chilliwack to new home at B.C. Aviation Museum

The challenging move to Vancouver Island will be documented by Discovery Channel film crews

A video posted to social media by Chilliwack resident Rob Iezzi shows a teenager getting kicked in the face after being approached by three suspects on Friday, Jan. 22, 2021. (YouTube/Rob i)
VIDEO: Security cameras capture ‘just one more assault’ near B.C. high school

Third high-school related assault captured by Chilliwack resident’s cameras since beginning of 2021

FILE - In this Feb. 14, 2017, file photo, Oklahoma State Rep. Justin Humphrey prepares to speak at the State Capitol in Oklahoma City. A mythical, ape-like creature that has captured the imagination of adventurers for decades has now become the target of Rep. Justin Humphrey. Humphrey, a Republican House member has introduced a bill that would create a Bigfoot hunting season, He says issuing a state hunting license and tag could help boost tourism. (Steve Gooch/The Oklahoman via AP, File)
Oklahoma lawmaker proposes ‘Bigfoot’ hunting season

A Republican House member has introduced a bill that would create a Bigfoot hunting season

Economic Development and Official Languages Minister Melanie Joly responds to a question in the House of Commons Monday November 23, 2020 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Federal minister touts need for new B.C. economic development agency

Last December’s federal economic update promised a stimulus package of about $100 billion this year

FILE - In this Nov. 20, 2017, file photo, Larry King attends the 45th International Emmy Awards at the New York Hilton, in New York. Former CNN talk show host King has been hospitalized with COVID-19 for more than a week, the news channel reported Saturday, Jan. 2, 2021. CNN reported the 87-year-old King contracted the coronavirus and was undergoing treatment at Cedars-Sinai Medical Center in Los Angeles. (Photo by Andy Kropa/Invision/AP, File)
Larry King, broadcasting giant for half-century, dies at 87

King conducted an estimated 50,000 on-air interviews

BC Coroners Service is currently investigating a death at Canoe Cove Marina and Boatyard in North Saanich. (Black Press Media File)
Drowning death in North Saanich likely B.C.’s first in for 2021

Investigation into suspected drowning Monday night continues

Kimberly Proctor, 18, was murdered in 2010. Her family has spent many of the years since pushing for a law in her honour, that they say would help to prevent similar tragedies. (Courtesy of Jo-Anne Landolt)
Proposed law honouring murdered B.C. teen at a standstill, lacks government support

Ministry of Mental Health and Addictions has concerns with involuntary detainment portion of act

Chief Public Health Officer Theresa Tam speaks during a daily briefing in Ottawa. (THE CANADIAN PRESS/Adrian Wyld)
31 cases of COVID-19 variants detected in Canada: Health officials

Dr. Theresa Tam made announces 13 more variant COVID-19 cases in Canada

Most Read