COVID-19 wrecks the economy and creates debt

Earlier this week the CBC reported that because of the COVID-19 pandemic the federal government will have a deficit of $252 billion, that’s billion with a ‘b’.

The feds haven’t had a surplus since who knows when, but on the Island for the past couple of years there have been surpluses, $75 million the year before last.

The Province of P.E.I. was also expecting a small surplus of some $2 million for this past fiscal year. But, that was not to be, and the province ended up with a deficit of $5 million.

P.E.I. Finance Minister Darlene Compton said there is “little doubt” there will be a deficit this year. She also said in the same news report that though, “we projected a $2 million surplus, . . . that last week or so of March changed that.”

The reason was the efforts taken to fight the pandemic. It was about the middle of March that the chief medical officer closed many businesses and told people to stay home.

If the surplus of $2 million in 2019-20 became a $5 million deficit, then those last two weeks of March cost the province some $7 million. One shudders to think what the total cost of the pandemic will be to the province.

It will be a lot, and not just because of the $40 million or so the province is putting up to help Islanders deal with the pandemic. With the closure of most retail businesses, the drop in sales taxes alone will be in the millions.

Sales taxes in the 2018-19 fiscal year were some $312 million dollars. Corporate taxes were another $123 million. On top of the loss of sales taxes, there will also be a number of businesses that won’t be paying any corporate taxes this year.

For the past three or four years the economy of the Island has done exceptionally well. Generally speaking farm prices have been good, lobster fishermen have landed record catches with reasonable prices, and for each of the past three years, tourism operators have had over 1,000,000 over-night visits.

Tourism is the sector of the provincial economy that will likely be the hardest hit. Today there are virtually no tourists, and very, very few business travellers. Most of the hotels, motels and other accommodations are closed.

There is simply no business to be had.

And there is not much prospect of any. Even, if COVID19 is completely eradicated on the Island there is still a concern about allowing people from other areas where it has been more prevalent to come to the province. That is a decision no one seems ready to deal with, as yet.

Then there’s the fact that even if it is decided to allow tourists to come, a number of the events that attract them have been canceled. There will be no performances at the Confederation Centre this year, the Cavendish Beach Music Festival has been cancelled, even the Village Feast in Souris won’t operate this summer.

Of course, the problems on the Island are not unique, the economies of all provinces are suffering because of the efforts to fight the pandemic. Alberta and Newfoundland also have record low prices in the oil industry. An industry that is critical to the financial health of both those provinces.

While things maybe worse elsewhere, it won’t be easy on the Island. There will be a number of businesses go bankrupt. There will be people suffering financial hardship and it will be sometime before the Island economy will achieve the heights it has enjoyed for the past few years.

However, this too shall pass, but not quickly.

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The last edition of this column was very critical of the employees of Service Canada.

It mistakenly assumed that because the offices of Service Canada were closed to the public, the employees were at home, not working. It was stated those employees should be embarrassed.

This was wrong, most Service Canada employees were in the office, and some could be reached by phone to provide assistance to the public.

It is The Meddler who should be embarrassed, and he is.