The document summarizes Stephen Tapp's presentation at the CGAI Conference on February 9, 2021. It discusses the COVID-19 economic shock and policy response. The pandemic caused a pervasive and profound recession that impacted sectors and firm sizes unequally. However, the global economic contraction was not as severe as initially predicted due to unprecedented policy support and resilient global goods trade. Looking ahead, the post-pandemic economy may see more online activity, inequality, public debt, and diversified global commerce.

1. CGAI Conference
Feb. 9, 2021
Stephen Tapp,
Deputy Chief Economist and
Director of Research
LIVING IN
ECONOMIC
EXTREMES
A TERRIBLE YEAR, BUT MUCH
BETTER THAN EXPECTED

2. 2
THE COVID SHOCK:
PERVASIVE, PROFOUND, UNEQUAL

3. 3
SCOPE
39%
61%
34%
66%
Source: Various EDC Trade Confidence Index surveys.
78%
22%
27%
73%
COVID
(April 2020)
Global protectionism
(2020)
U.S. tariffs
(2018)
Canada-China tensions
(2019)
Negative impact reported by Canadian exporters
% of respondents

4. 4
SCALE
Source: Department of Labor
0
1
2
3
4
5
6
7
1970 1980 1990 2000 2010 2020
U.S. initial unemployment claims
Millions per week

5. 5
UNEQUAL ACROSS SECTORS…
-39
-18
-10
-4
-45
-40
-35
-30
-25
-20
-15
-10
-5
0
5
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Rest of economy
Vulnerable services*
U.S. employment
% change since Feb 2020
*Includes restaurants, hospitality, arts, entertainment, recreation, other personal services
Sources: EDC Economics; Bureau of Labor Statistics; Opportunity Insights

6. 6
…AND FIRM SIZE
Sources: Statistics Canada, EDC Economics
-25
-20
-15
-10
-5
0
Mar Apr May Jun Jul Aug Sep Oct Nov
Small (< 100 employees) Large ( > 500 employees)
Number of Canadian goods exporters
% change since Feb 2020

7. 7
THE POLICY RESPONSE:
UNPRECEDENTED, EFFECTIVE

8. 8
MASSIVE RESPONSE
Federal Reserve monetary policy
% % of GDP
Direct discretionary fiscal support
% of GDP, as of Feb. 1, 2021
Sources: Haver Analytics, Federal Reserve Board, IHS Markit, IMF COVID-19 policy tracker
6.8
7.7
11.0
14.6
15.6
16.3
16.7
0 5 10 15 20
Italy
France
Germany
Canada
Japan
United Kingdom
United States
15%
20%
25%
30%
35%
40%
0.0
0.5
1.0
1.5
2.0
2.5
Jan-18 Jul-18 Jan-19 Jul-19 Jan-20 Jul-20
Policy rate, LHS Assets, RHS

9. 9
STABALIZED FINANCIAL MARKETS
Sources: EDC Global Financial Markets.
0
2
4
6
8
10
12
14
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
-40%
-30%
-20%
-10%
0%
10%
20%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
U.S. stock market
% change since Jan. 2020
U.S. investment grade debt yield
%

10. 10
SUPPORTED CONSUMERS
-2
-1
0
1
2
3
4
Jan Apr Jul Oct
Wages Gov't transfers Personal income
Monthly change in U.S. personal income
Trillions of dollars
Jan Apr Jul Oct
-20
-15
-10
-5
0
5
10
Sources: EDC Economics, Census Bureau, Bureau of Economic Analysis
U.S. retail sales
% change since Jan. 2020

11. 11
PREVENTED BANKRUPTCIES
Canadian jobs in
“high-COVID-risk”
sectors
Source: IMF World Economic Outlook update, Jan 2021.
Business bankruptcy dynamics for major economies
% difference relative to level at the start of each recession
-30
-20
-10
0
10
20
30
40
-4 -3 -2 -1 0 1 2 3 4 5 6 7 8
Quarters from beginning of recession
Typical recessions
COVID recession
Global financial crisis

12. 12
GLOBAL GOODS
TRADE RESILIENCE

13. DIRE INITIAL PREDICTIONS
“2020 will show a trade collapse
far larger than 2008-09.”
Richard Baldwin, April 7, 2020
World goods trade 2020
forecast in April
-13% (optimistic scenario)
-32% (pessimistic scenario)
Sources: VoxEU; WTO

14. 14
SUPPLY CHAINS LARGELY HELD UP, SERVICES HIT HARDEST
Source: WTO
WTO goods forecast
2020: -9%
2021: +7%
Global goods trade
Year-over-year, % change
Key services components
Year-over-year, % change
+1.5
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2008 2010 2012 2014 2016 2018 2020
Travel,
-68%
Transport
-24%
Other, -2%

15. 15
CANADA’S SURPRISING
PERFORMANCE

16. 16
Merchandise trade
Billions of dollars
Sources: EDC Economics; Statistics Canada
V-SHAPED GOODS TRADE, L-SHAPED SERVICES
Services trade
Billions of dollars
8
9
10
11
12
13
14
2015 2016 2017 2018 2019 2020
Exports Imports
30
35
40
45
50
55
2015 2016 2017 2018 2019 2020
Exports Imports

17. 17
NOT AS BAD AS FEARED
-25
-20
-15
-10
-5
0
5
10
15
20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Nominal Goods Exports Nominal GDP
Canadian economic performance
Year-over-year % change, annual

18. 18
CHINA LEADING, BUT STRONG CANADIAN PERFORMANCE…
Goods exports
% nominal change from 2019Q4, in local currencies
-30%
-20%
-10%
0%
10%
20%
2020Q1 Q2 Q3 Q4
China Australia Canada U.S. Germany U.K.
Sources: EDC Economics, General Administration of Customs (China), Australian Bureau of Statistics, Deutsche Bundesbank, Office of National Statistics
(U.K.), Statistics Canada

19. 19
…UNLIKE PAST RECESSIONS WHEN CANADA LAGGED
Goods exports
% change from start of recession
T = 2008Q2
Source: EDC Economics, General Administration of Customs (China), Australian Bureau of Statistics, Deutsche Bundesbank, Office for National Statistics (U.K.),
Census Bureau (U.S.), Statistics Canada, Haver Analytics
-40%
-30%
-20%
-10%
0%
10%
20%
30%
1 2 3 4
2001 recession
China Australia Canada U.S. Germany U.K.
Years since start of recession
5-year Canadian
export recovery
T = 2000Q4
-40%
-30%
-20%
-10%
0%
10%
20%
30%
1 2 3 4 5 6
Global Financial Crisis 2008
China Australia Canada U.S. Germany U.K.
6-year recovery
Years since start of recession

20. 20
A WELCOME U.S. RESET

21. 21

22. 22

23. 23
BIDEN TIME

24. 24
THE POST-PANDEMIC ECONOMY

25. 25
MORE ONLINE ACTIVITY
Sources: EDC Economics; Trevor Tombe; Finance Canada
E-commerce sales in Canada
Millions of dollars per month change since Jan 2020
Share working remotely
%

26. 26
MORE INEQUALITY
Sources: EDC Economics; Finance Canada
-40
-35
-30
-25
-20
-15
-10
-5
0
5
Jan Apr Jul Oct
Change in U.S. employment by income
% change since Jan 2020
High income
Low income

27. 27
MORE PUBLIC DEBT
Sources: EDC Economics; IMF Fiscal Monitor
0
20
40
60
80
100
120
140
1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020
Advanced
WWI WWII GFC COVID
Emerging markets
General Government Debt
% of GDP

28. 28
LESS GLOBALIZED?
Sources: EDC Economics
Global merchandise trade
% of GDP
0
10
20
30
40
50
60
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020*

29. 29
MORE RESILIENT SUPPLY CHAINS?
Have changed suppliers
% of respondents
7%
9%
14%
11%
Changed suppliers (domestic) Changed suppliers (international)
Apr 2020 Oct 2020
Sources: EDC COVID-19 Research Panel, Canadian Chamber of Commerce, Statistics Canada
18%
21%
May-Jul 2020 Sep-Oct 2020
Intend to diversify supply chains
% of respondents, “very likely” or “likely”

30. 30
MORE DIVERSIFIED, DIRECT GLOBAL COMMERCE?
0%
20%
40%
60%
80%
2012 2013 2014 2015 2016 2017 2018 2019 2020
Planning to export to new countries
% of respondents
0%
10%
20%
30%
2012 2013 2014 2015 2016 2017 2018 2019 2020
Planning to invest outside Canada
% of respondents
Source: EDC Trade Confidence Index

31. 31
CONCLUSIONS
• COVID is the most disruptive, transformative shock
of our lifetimes.
• Policy support has helped.
• Trade has been surprisingly resilient.
• A welcome U.S. reset is underway.
• The post-pandemic economy will be more digital,
unequal and indebted, it might also be more local,
resilient, diversified and direct.

32. 32
Y NEXT YEAR?

33. 33
EDC ECONOMICS
RESOURCES
• Weekly Commentary, Economic Insights newsletter
• Global Economic Outlook
• Global Export Forecast
• Country Risk Quarterly
• Trade Confidence Index
• Top 10 Global Risks
• Trackers: Canadian Recovery, Commodities, Global Markets
• Research reports
@ExportDevCanada
Export Help Hub
ExportHelp@edc.ca
edc.ca/en/tag/economic-insights.html

34. 34
Stephen Tapp
Deputy Chief Economist,
Export Development Canada
Email: STapp@edc.ca
Stephen Tapp
@Stephen_Tapp
CONTACT

35. 35
RECOMMENDED READING

36. edc.trade/economic-insights
Peter Hall
@PeterGHallXIII