Canadians' Confidence Shaken as Coronavirus Saps Economy

“If I was to take a look at the numbers today, what we’re realistically looking at is the likelihood of a recession within the next six months is now quite high,” Nanos Research Group Chairman Nik Nanos told BNN Bloomberg.

Winners and losers

In an effort to stabilize financial markets, last week the Bank of Canada announced a second emergency cut to its overnight interest rate, bringing it to 0.75%. Then the prime rate, which is influenced by the Bank of Canada benchmark, fell 50 basis points earlier this week to 2.95%.

The prime rate in turn affects the interest rate your lender gives you on a loan — meaning homebuyers and mortgage holders will be able to benefit from the tumble.

But many companies are starting to feel the pressure, as non-essential businesses close their doors. On Tuesday, Ontario’s premier Doug Ford declared a state of emergency, shuttering theatres, concert venues and sit-in bars and restaurants until at least the end of the month.

With streets and shopping malls already bare, the announcement triggered concerns of widespread layoffs, potentially leading to cash-strapped consumers defaulting on mortgages and lines of credit.

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Aid on the way

In response to the growing financial tension, the federal government announced Monday that it is planning to buy out up to $50 billion of insured mortgage pools. Ottawa made a similar move in response to the financial crisis of 2008.

“This action will provide stable funding to banks and mortgage lenders in order to ensure continued lending to Canadian consumers and businesses,” the government explained in a statement.

Federal Finance Minister Bill Morneau has pledged to submit a stimulus package this week and do “whatever it takes” to keep the public-health crisis from turning into a lengthy economic one.

However, the researchers behind the consumer confidence index expect Canadian sentiment will only decline further as the situation develops.