What Canadian exporters need to know about coronavirus (COVID-19)

Export Development Canada has published answers to some frequently asked questions about Covid-19 and its impact on the global economy.

Here they are.

1. What is COVID-19?

COVID-19 is a disease caused by a new coronavirus, first identified in Wuhan, China, in December 2019. Symptoms range from mild flu-like cough and congestion to severe respiratory infections. The virus is also known as “severe acute respiratory coronavirus 2” or simply “coronavirus”. On March 11, 2020, theWorld Health Organization (WHO) declared the COVID-19 outbreak a pandemic.

2. Does COVID-19 hinder international trade?

Yes. In an attempt to stem the spread of the disease, many countries have closed ports and factories, and imposed travel restrictions, disrupting international trade and supply chains.

In its Spring 2020 Global Economic Outlook, EDC Economics forecasts anemic world growth of 1.6% in 2020 – the worst since the global financial crisis in 2008 – but a spectacular rise to 5.3% in 2021. In advanced economies, growth will be minimal in 2020 (just 0.2%), but should accelerate to 3.7% in 2021. Growth in emerging markets will be exceptionally weak at 2.4%. However, in line with the trend of recent decades, it will rebound to 6.3% in 2021.

3. What does EDC do to support Canadian exporters?

On March 13, 2020, the Government of Canada announced the creation of the $10 billion Business Credit Availability Program (BCAP) to help Canadian businesses meet the challenges brought on by the virus. This program enables EDC, in conjunction with the Business Development Bank of Canada (BDC) and private sector lenders, to enhance its insurance and financing programs so that affected Canadian businesses can get the credit they need during this crisis.

We have also created EDC’s Business Credit Availability Program (BCAP) Guarantee. This flexible risk-sharing guarantee helps Canadian exporters affected by COVID-19 obtain more working capital to cover their payroll and operating costs, with reduced risk for the financial institution.

4. What types of companies are at risk?

The COVID-19 will have a major impact on Canadian service exports, given the drop in tourism and business travel expected in the first half of 2020. Weak commodity prices, including oil, and the prolonged closure of Chinese factories will also hurt Canadian goods exports.

5. What are the risks for the Canadian economy? What impact will this crisis have on GDP?

The severity of the impact on the Canadian economy depends on the duration of the pandemic and the spread of the virus. According to EDC Economics, after a sluggish year-end in 2019, Canada’s economic outlook in 2020 will be hit hard by low oil prices, slowing international trade and the containment efforts of COVID-19. EDC Economics also forecasts that the Canadian economy will grow by just 0.4% in 2020, but will recover strongly in 2021 to reach 3.8%.

The Canadian dollar should average USD 0.72 in 2020, and USD 0.75 in 2021. As the COVID-19 pandemic subsides and global growth gets back on track in 2021, the recovery in commodity prices should contribute to the long-term appreciation of the Canadian dollar.

6. Will EDC continue its efforts to create business opportunities in the affected areas?

Yes, but these steps will have to be modulated according to location. In recent weeks, EDC has taken steps to minimize the health risks to our employees, including travel restrictions. If you have any questions about our business development efforts, please contact your representative or an EDC trade advisor at tradeadvisor-conseiller@edc.ca or 1-888-220-0047 (9 a.m. to 5 p.m. ET).

7. To what extent can we expect a global recession?

EDC Economics estimates that the measures currently being taken by affected countries (including travel restrictions and other social distancing measures) will contain the COVID-19 pandemic by summer 2020.

Despite the adverse effects on the economy in the short term, we believe that markets will recover. Based on previous pandemics and health emergencies, markets are able to withstand a short-term shock, and we often see an upturn in economic activity to compensate for the compressed demand that took place during the crisis.

The economies most affected by the pandemic will undoubtedly be those with significant trade relations and integrated supply chains with China. Vietnam, Malaysia, Singapore and South Korea are particularly at risk, since trade with China accounts for more than a quarter of their total GDP.

As Japan and South Korea are major exporters of finished and intermediate products, the restrictive measures for the economy will resonate throughout their global supply chains. Automakers everywhere have already closed plants and slowed production. If European countries like Italy are hit harder, economic activity could slow even further.

8. What is EDC’s advice to Canadian companies regarding their activities in the affected areas?

EDC does not advise companies to avoid exporting to the epicentres of the pandemic (i.e. mainland China, Italy, the United States and Spain), but rather encourages them to carry out additional due diligence. In order to make informed decisions, it is important to obtain information from credible sources.

9. How is EDC monitoring the pandemic and its impact on international trade?

Our team of economic and trade experts is closely monitoring the situation, and we are in regular contact with our customers. EDC is assessing the impact of the epidemic on Canadian exports, which will ultimately depend on the severity and spread of the virus. We strongly encourage customers to be well-informed and to consult government travel warnings before undertaking international business activities.