National Post (National Edition)
‘Profound’ policy moves blunt virus impact, BMO says
But consumers, businesses are still struggling
Canada has taken enough measures to stabilize the economy from the COVID-19 pandemic — and now it’s a matter of time before those “profound” actions have an effect, according to Bank of Montreal chief executive Darryl White.
“I think we’re there from the perspective of starting to get capital to flow into the market,” White, 48, said in a phone interview after his company’s annual meeting on Tuesday. “But that doesn’t mean that there isn’t going to be very difficult consequences for many businesses.”
Governments and regulators are putting emergency measures into place more quickly than during the global financial crisis in 2008, White said. That puts Canada in a better position to bridge what he describes as a “very difficult” period for many businesses amid the economic turmoil.
“I wouldn’t be surprised if we’re seeing some positive growth in the North American economies by the end of the year, and my confidence that we’ll have a growing economy in 2021 is actually quite high,” he said.
Still, it’s too soon to measure the precise impacts of the stimulus plans, according to White.
“There’s a lag effect because people have to get at the funding, they have to get at the financing, they have to decide whether they’re going to put it in place for rent or payroll or when they have an ability to get back in business and have revenues come through the door,” White said. “It’s very important what’s been done, and it’s very appropriate.”
It’s also “early days” in terms of seeing stresses on Canadian consumers, who are already reaching out to the country’s banks to defer mortgage payments, according to White.
“At this stage, there’s definitely consumer stress but I wouldn’t say it’s excessive,” White said. “I would say that you should expect the real surge in consumer stress to be in the month of April, maybe a little bit in May.”
Adding to the country’s woes are what White described as “a perfect storm” of calamities for the energy industry — though hedging strategies may help offset some of the damage.
“I don’t know that we’ve ever seen an environment where you’ve got this simultaneous supply shock and demand shock, with respect to the oil flooding into the market globally and the demand that’s gone down as a result of the virus,” White said.
The vast majority of oil producers had hedged out their price risk, so there are very few who are immediately exposed to benchmark crude prices of US$20 a barrel, he said. Those hedges may mean a “softer landing” for the industry than many people may think, he said.
“There are very few that are exposed in the moment to that price of oil and they are reacting with management actions. There’ll be more consolidation, there’ll be more efforts on their own cost program, you’ll see production curtailment and capital expenditures which are reducing as we speak,” White said. “The question is how long does it last, not how deep does it go.”