While no cases of the new SARS-like virus have been confirmed in Canada, a major spread of the disease couldn’t come at a worse time for the nation’s economy.
Canada’s economy is emerging from what may have been its weakest growth performance since 2016 at the end of last year, and any rebound this year would face a major test if the disease spreads into the North American country, economists said. The impact on Canada, which is a major oil producer, could be large even if the country somehow managed to evade any global pandemic, through the impact of a slowdown in China on commodity prices.
The latest respiratory virus outbreak is reminiscent of the severe acute respiratory syndrome epidemic in 2003. Toronto had the most deaths from the illness outside Asia and tourism dropped, stunting Canada’s economic growth.
“China’s role in the world economy and as a driver of commodity prices has only grown now versus 2003,” Derek Holt, an economist at Bank of Nova Scotia, said by email. “So the indirect exposure of the Canadian economy to the impact of the coronavirus on China’s economy could be higher today than the indirect impact of SARS in 2003.”
The economy barely eked out any growth in the fourth quarter last year, prompting the Bank of Canada to acknowledge Wednesday that it may need to lower interest rates. The central bank is projecting annualized growth of 0.3 per cent in the final three months of 2019, the lowest quarterly growth in three years. The expansion is seen rebounding to 1.3 per cent in the first quarter of this year, and close to 2 per cent later in 2020, but that outlook would be put into jeopardy by a major global pandemic.
“What would a coronavirus shock do to the BoC’s policy moves? It’s obviously getting a bit premature, but it only reinforces easing expectations,” Holt said. “Lessons drawn from 2003-04 are helpful.”
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The latest virus has killed at least 25 people so far. It was first detected in Wuhan, China, and cases have since been reported in Japan, South Korea, Taiwan, Hong Kong, Singapore, Thailand and the U.S., with the State Department telling travellers to use increased caution when visiting China.
Health Minister Patty Hajdu, speaking to reporters Thursday in Ottawa, said there are no confirmed cases in Canada, though there are a handful of people under observation.
“Certainly this isn’t a great time for yet another downside risk to growth,” Stephen Brown, an economist at Capital Economics, said by email.