COVID-19 roundup: The ‘slower and bumpier’ next phase of the recovery

Bank of Canada Governor Tiff Macklem holds a press conference at the Bank of Canada amid the COVID-19 pandemic in Ottawa on Monday, June 22, 2020. The Canadian Press/Sean Kilpatrick

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It’s day 127 since Canada’s 100th coronavirus case. The number of cases is 108,719 as of publication time, up 233 since yesterday—flat from the seven-day prior average of 233 new cases. At its peak on May 3, the seven-day average was 1,603 new cases a day. 

Beijing has recorded its ninth consecutive day with zero coronavirus cases.

“Inherently unknowable”: It will be sometime in 2022 before Canada’s economy returns to where it was at the end of 2019, according to the Bank of Canada’s (BoC) latest monetary policy report, released Wednesday. The central bank projected real GDP to drop 8.8 per cent in the third quarter of this year, and 6.8 per cent cent in the last three months. It expects the economy to shrink by 7.8 per cent overall in 2020, before rebounding to 5.1 per cent growth next year and 3.7 per cent the year after. “This is not a normal recession,” said governor Tiff Macklem, adding that “the exceptionally strong near-term growth of the reopening phase is likely to give way to a slower and bumpier recuperation phase.”

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The bank’s calculations assumed that the virus doesn’t get a second wave, that the pandemic is mostly contained by mid-2022 via a vaccine or treatment and that governments lift lockdown measures. But it also warned that the “course of the pandemic is inherently unknowable.” 

Businesses reopening and employees returning to work are creating an immediate uptick in growth, but the bank predicted the rest of the recovery will be “more protracted and gradual,” citing continued physical distancing, reduced foreign demand and low private-sector and consumer confidence. Households will save less and spend more than they have during the pandemic so far, but both will take a couple of years to return to late-2019 levels. 

Business investment will also take time to recover, the bank predicted, citing the debt companies have accumulated as well as economic uncertainty and less need to build capacity to satisfy reduced demand. But spending on technology will remain relatively strong, and “the pandemic has already accelerated digitalization in some sectors.”

The BoC predicts Canada will fare better than some other advanced economies in the short term. It’s forecasting an 8.1 per cent contraction in the U.S. this year, followed by growth of 3.4 and 4.3 per cent, respectively, over the next two years. The Euro area recovery trails both, dropping 9.3 per cent this year, before real GDP increases of 4.2 per cent in 2021 and 3.6 per cent in 2022.

Also on Wednesday, the monetary policy authority kept its target for the overnight rate at 0.25 per cent, in the first such decision since Macklem took the top job in June. It plans to hold steady at that level “until economic slack is absorbed so that the two percent inflation target is sustainably achieved”; it’s currently projecting consumer price index inflation of 0.6 per cent in 2020 and 1.2 per cent in 2021. The prospect of interest rates remaining low for longer is designed to assuage some of the uncertainty businesses “across all regions and sectors” told the bank they’re feeling right now. The hold will last “probably into 2023 if not later,” Scotiabank head of capital markets economics Derek Holt wrote in a Wednesday note. 

“The Long and Winding Road would be the appropriate musical score” for Wednesday’s BoC message, CIBC capital markets chief economist Avery Shenfeld wrote in his own note, since “the path to a full recovery is both lengthy and uncertain.” Paul McCartney is currently waiting on a delivery of gin from the Buckingham Palace gift shop courtesy of Ryan Reynolds, so we decided not to bother him with a request for comment.

In the markets: All major North American indices closed up on positive news about vaccines being developed at the University of Oxford and biotech Moderna. Goldman Sachs beat analyst expectations, building on Tuesday’s strong results from JPMorgan Chase and Citigroup. 

The Canadian dollar rose 0.72 per cent after the Bank of Canada held rates steady, reaching 73.97 cents U.S. in late afternoon trading. U.S. production rose 5.4 per cent in June. China’s benchmark CSI 300 fell 1.3 per cent after President Donald Trump signed a law ending Hong Kong’s special trade privileges with the U.S. Offshore investors pulled US$400 million out of Chinese shares on the news, adding to the record US$2.5 billion sold Tuesday. Meanwhile, copper futures are surging as a group of investors bet that the U.S. will continue to reopen despite record coronavirus cases. 

“No member state responded to Italy’s request and to the commission’s call for help…. The lack of response to the Italian request was not so much a lack of solidarity. It was a lack of equipment”: The European Union was woefully “ill-equipped and institutionally incapable” of responding to the pandemic, according to a new report by The Guardian

Another government deal for Shopify: The e-commerce company has partnered with the federal government to help small businesses independently move their operations online. The initiative, called Go Digital Canada, will create a “central resource hub” with support, tools and webinar training for businesses looking to go digital. Those who sign up before October 1 will be eligible for a 90-day free trial. This is the latest government-backed effort Shopify is leading. It’s also working with Digital Main Street and the City of Toronto to offer a similar initiative called ShopHere. Since launching in May, the program has helped 3,000 businesses, such as Toronto cafe Plentea and food-delivery service Crisp, create online stores. Shopify and Ottawa are also working together on a national contact-tracing app, as well, though it is now 13 days overdue

Bay Street to Main Street: In its first “sobering” report examining the state of over 30,000 small businesses across 50 countries, Facebook found that 64 per cent of Canadian businesses on its platform reported lower sales than last year. The report, created in partnership with the OECD and the World Bank, found 41 per cent of Canadian small businesses were concerned about future cash flow and almost as many were looking to reduce their workforce. The Canadian section of the report highlights two local businesses—Montreal-based Miss Boon and Toronto-based Bôhten Eyewear—both of which said they saw online sales surge through their Facebook operations during the pandemic. In its global reflections, Facebook’s study notes women-led businesses were more impacted than those led by men, but that half of the entrepreneurs surveyed remain optimistic, with an average of 23 per cent of small businesses globally reporting they received financial support, mostly from government loans.

  • National Bank launched a venture fund in partnership with the Quebec government and is looking to raise $200 million. 
  • The Competition Bureau should investigate grocers for ending pandemic pay bumps on the same day, according to Liberal MP Nathaniel Erskine-Smith. 
  • Ottawa is spending over $3.1 million on programming supporting young entrepreneurs in Quebec and $2 million as part of a pilot program designed to combat the opioid crisis in B.C. 
  • The Caisse de dépôt et placement du Québec announced a loan to Medicom, which makes infection-control products. The firm will use the money to expand in Asia and make acquisitions. 
  • GoSecure, a Montreal- and La Jolla, Calif.-based firm, raised US$20 million from an investor group that included BMO. 
  • OMERS Ventures founder John Ruffolo is joining’s board of directors. 
  • Calgary-based Calfrac Well Services plans to switch $510 million in debt for equity as part of its restructuring. 
  • Amazon’s growth is helping Broccolini Construction, one of Quebec’s largest real estate developers, do well despite the pandemic-induced downturn in other real estate construction.
  • Toronto Pearson Airport is cutting 27 per cent of staff, letting 300 people go and eliminating 200 unfilled positions. 
  • Some experts say there’s a heightened risk of insider trading in Canada due to gaps in the technology used to monitor traders working from home. 

Crowdsourcing the crisis: Spring Activator, a Vancouver-based accelerator, launched an online “business resilience program” on Wednesday to help small businesses and entrepreneurs recover from the impacts of COVID-19. Foko, a Gatineau, Que.-based startup, has launched a platform called Get Working to help companies looking to reopen their offices manage desk booking and COVID-19 screening.

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In the lab: Moderna has released promising data from its early-stage trial, finding that its vaccine candidate generated a positive immune response in volunteers, with some minor side effects. Results from Oxford University and AstraZeneca are expected next week. Oxford’s candidate, led by Sarah Gilbert, is in human trials, in which Gilbert’s three children are voluntarily participating. AstraZeneca has signed agreements to produce two billion doses, a process the CEO of the Vaccines Manufacturing and Innovation Centre described as “trying to go from making a loaf of sourdough in your kitchen to making 100,000 sourdough pizzas.” Meanwhile, more than 150 countries have partnered with Gavi, a global vaccine initiative that promises to provide each country enough doses to cover 20 per cent of their populations.

“Rocco, put your tail down”: Scottish MP John Nicolson was unflustered by his cat’s interruption of the virtual proceedings of the House of Commons.

* We’re emphasizing new cases, rather than running totals, because “flattening the curve” is when each day’s new cases are fewer than those of the previous day. The percentage increase is determined based on how today’s cases compare to a rolling seven-day prior average.


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