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| Sat, 2nd May 2020 20:20:00 |
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Canada’s Oil Patch Struggles To Survive The Worst Recession Ever |
Canada is likely going through its worst-ever recession, with more pain to come in May when the statistics authorities and analysts will have a fuller picture of the economic disaster brought about by the coronavirus pandemic and the measures to curb its spreading.
The oil price collapse with the demand crash in the Covid-19 outbreak, and the month-long oil price war between Saudi Arabia and Russia are pressuring Canada's economic activity, more than 5 percent of which comes from the oil and gas sector.
Canada's oil industry – which contributed US$77.4 billion (C$108 billion) in direct real GDP to the economy in 2019, or 5.6 percent of Canadian GDP – was hit hard by the double supply-demand shock over the past two months, becoming one of the first collateral victims of the Saudi-Russian spat.
The recovery of Canada's oil industry after this shock will be slow, considering the fact that the global glut threatens to fill up all available storage by as early as mid-May. Many firms may not survive this price crash.
Because of the importance of the oil industry in Canada's economy and trade in goods, overall economic recovery in the country could be slower than analysts had initially predicted and slower than in other advanced economies that are not big oil producers.
A Reuters poll of 25 economists at the end of April showed that Canada's economy likely shrank by 9.8 percent annually in Q1 and is set for a 37.5-percent plunge in Q2.
In a flash GDP estimate in mid-April, Statistics Canada said the economy contracted by 9 percent in March, the steepest one-month GDP drop ever since the series started in 1961. More than 1 million people lost their jobs in March, with employment rate down by 3.3 percentage points to 58.5 percent—the lowest rate since April 1997.
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