OECD countries could lose $10 trillion in GDP growth because of COVID-19

During the previous several weeks, Prime Minister Justin Trudeau’s government has been working on a new plan for economic recovery.

Media reported that a guaranteed basic income is on the list of 50 resolutions under discussion, and it’s expected to be discussed at a two-day cabinet retreat in Ottawa.

It’s a good sign that Ottawa is exploring new ideas that can be used as an engine for Canada’s long-term economic rebound.

On Sept. 23, the prime minister will provide a detailed vision for the future and a new plan for keeping Canadians safe while we rebuild a stronger Canada.

The speech will likely focus more on surviving through the pandemic, with details on the longer-term rebound measures revealed only with an economic statement later this fall.

Earlier, the prime minister warned that Canadians will have to live with COVID-19 for many more months. According to Canada’s chief public health officer Dr. Theresa Tam, in case we can’t control the virus, there may be another lockdown.

Even if you don’t agree with the Liberals’ ideas, it’s still a good sign that they admit our economic vulnerability. Controlling the virus and introducing policies for long term growth should be reached in parallel.

As we can see in case of the U.S., inaction costs too much.

McKinsey Institute says the lack of effective policy measures against the virus may lead to the additional loss of thousands lives and take away $10 trillion in GDP growth until 2024 among The Organisation of Economic Co-operation and Development (OECD) countries.

“Countries that are following the balancing-act path may switch to a near-zero-virus strategy and restore public confidence by the end of this year in case they act quickly,” – McKinsey partners Sarun Charumilind and Jessica Lamb believe.

“Economic activity would remain restrained for some time, and those countries would need to invest tens or even hundreds of billions of dollars in COVID-19 testing, tracking, and tracing, which are costs distinct from payroll and business support. However, the opportunity cost is also huge. We estimate, that for every three months’ delay in getting the virus under control OECD countries will delay the recovery of GDP to pre-crisis levels by six months.”

Canada saw zero deaths from coronavirus during the weekend – fir the first time in half a year. Nevertheless, the number of cases is growing again.

Even if it’s only a short success of controlling the virus, it will still lead to a 40% annual increase of Canada’s GDP in the third quarter, says RBC, which earlier predicted a 33% gain. However, the overall output is still below the pre-pandemic levels.

“We also raised our fourth quarter growth forecast and now expect less risk to the consumer outlook after the government’s proposed benefit changes,” – RBC analysts noted. “Canada’s COVID-19 case growth begins to go up slightly, but the country has done a relatively good job of controlling the virus. Outbreak severity and the softening of government benefits are two main risks for the economies we track.”

During the next few weeks, we’ll see a lot of furious discussion of the Liberals’ ideas.

But it’s still better than in case of the U.S., where there’s denial concerning the virus and no help is expected for the unemployed in the nearest future.