April 30, 2020 / 1:37 PM / a month ago

UPDATE 2-Canada GDP stalls in February, but seen falling dramatically this year

(Adds scenario from Canada’s parliamentary budget officer)

By Kelsey Johnson

OTTAWA, April 30 (Reuters) - The Canadian economy stalled in February, Statscan said on Thursday, as parliament’s budget watchdog warned that a dramatic contraction was possible this year, with a spike in deficit and debt levels.

Statistics Canada said growth potential was affected in February by a teacher’s strike in Ontario and as the global spread of the coronavirus disrupted the movement of people and goods. Analysts in a Reuters poll had forecast a 0.1% increase.

The economy could have shrunk a record 9% in March, Statscan said in a flash estimate earlier this month, as the coronavirus and a plunge in oil prices sank in.

Officials have shuttered non-essential businesses and urged people to stay home since mid-March to slow the spread of the outbreak. Ottawa has also rolled out billions of dollars in fiscal aid for businesses and individuals to weather the pandemic.

On Thursday, Canada’s Parliamentary Budget Officer (PBO) released an updated economic analysis, including a scenario in which real GDP in 2020 could shrink 12%, with a possible 20% contraction in the second quarter alone. That would be the worst GDP data since the series was compiled in 1961, the PBO said, noting that the scenarios were not forecasts.

In a March 27 scenario analysis, the PBO had assumed real GDP growth in 2020 would fall by 5.1%.

Based on the worsening growth scenario, the PBO estimated the federal government’s deficit could swell to C$252.1 billion ($181.38 billion) in 2020-21, or 12.7% of GDP. As of April 24, Ottawa’s aid package totaled C$146 billion, it added.

The PBO estimated that Canada’s debt-to-GDP ratio in 2020-21 would be 48.4%.

The Statscan report on February GDP said educational services fell 1.8%, the most since June 2014, due to intensifying rotating strikes by elementary and secondary school teachers in Ontario.

The country’s transportation and warehousing sector contracted 1.1%, as seven of the 10 subsectors declined. Rail transportation dropped 5.1% as protesters blocked domestic rail lines, while air transportation fell 2.6% as carriers canceled some international flights.

In a separate release, Statistics Canada said Canadian producer prices fell 0.9% in March from February on lower energy and petroleum prices, while raw material prices plummeted 15.6%. ($1 = 1.3899 Canadian dollars)

Reporting by Kelsey Johnson, additional reporting by David Ljunggren; Editing by David Gregorio and Richard Chang

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