Investments, ‘playbook’ key in restarting economy, analysts say

As the spread of COVID -19 creates the largest monthly job losses in Canada in more than 40 years, disrupts business routines and infects thousands of people across the country, some analysts are wondering what a careful restart of the economy would look like.

As the conditions around the country remain in flux, economists and policy-makers say it is imperative to start thinking about investments that will allow Canada to emerge stronger from the crisis.

“You don’t want to waste a crisis,” said Benjamin Tal, deputy chief economist at CIBC World Markets Inc. “You want to use that crisis to change things, to accelerate trends that were there already and build on the fact that there is a social demand for this kind of change.”

CIBC forecasts Canada’s GDP to contract 6.9 per cent this year, before rebounding 6.8 per cent in 2021.

For the moment, Tal said the government needs to maintain its discipline about social distancing and other measures that slow the spread of coronavirus because a second wave would be “disastrous.” That means “essential” workers will be critical in the short term to growing the labour force.

“I see their market power rising,” said Tal. “We need to pay them more to retain and attract them.”

He also suggested that with the government borrowing hundreds of billions of dollars and amassing debt, there needs to be a concrete plan to invest the money wisely so the gains are more than short-term.

Tal called for investment in what he termed “the infrastructure of the 21st century,” not necessarily roads and tunnels, but technology such as 5G networks and the associated scientific research needed to advance such projects.

Investment in public transportation could help lower real estate costs in cities such as Toronto and Vancouver where young people are priced out, he said.

In a report Friday, the C.D. Howe Institute Crisis Working Group called for a “playbook” on the return to normal business conditions, cautioning that uncertainty around the path to a recovery could be harmful by itself.

While the group commended the speed of the federal response to the unfolding pandemic, it also urged a continual review of wage subsidy or small business loan programs so that the implementation is smooth. The report also called on the federal and provincial governments to create a framework, with clearly defined metrics, that govern when various social distancing and other measures can ease.