Answer

Current Economic Situation

The corona virus disease 2019 (COVID 19) pandemic has affected both the Canadian and global economies in various ways. Primarily, business activities have declined, thereby leading to a reduction in many economic practices, which act as vital sources of revenue to economies.  Consequently, economic recovery programs are required to revive businesses.

The Global Economy

The growth of the global economy has been disrupted by the current health crisis leading to a contraction of the overall world economy. Ideally, before the COVID 19 pandemic, there was increased optimism regarding the global economy due to the phase one trade agreement between China and the USA. The agreement had led to growth in the manufacturing sectors of both countries, which also influenced the improvement in the labour and service sectors.  However, due to the economic retardation effect from measures carried out to stop COVID 19, there has been a significant reduction in economic activities at the global level.

The decline has led to various undesired changes such as growing unemployment, reduction in income levels, decreasing commodity prices, and increasing levels of indebtedness. The disruption is as shown in chart one, which is based on the purchasing manager’s index (PMI) over six years. Economic recovery at the global level will vary from region to region, making it challenging to have a single international policy.

Figure 1: COVID 19 disruption on the global economy.

Canadian Economy

The Canadian economy has firm employment resilience, which is expected to hold during the Covid 19 pandemic. The continuing effect of the pandemic has led to a sharp decline of economic activities, which included reduced demand, supply, and income levels.  Moreover, the inability to know how long the pandemic will last is affecting spending behaviours of both individuals and business as people avoid spending. Investment has also been affected negatively.  The lower commodity prices is a significant impact on Canada’s changed terms of trade and the decline in exports.

The reduction in oil and gas prices has also affected the Canadian economy, which relies on the sector significantly.   As such, investment in the oil and gas sector has also dropped.  In collective responses to these changes, most Canadian businesses, which are economic drivers, have reduced operating workers, send home workers, and cut pay levels.   Furthermore, the reduction in investment has also contributed to a reduction in household spending and income.  For instance, in March 2020, over a million jobs were lost in Canada, while the other two million employees started working on reduced shifts,