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Written By: Benjamin Pipicelli
Economics Newsletter – May 19, 2023
Canada’s Economy at a Glance
Economics Society News, Events, and Articles
– Welcome to the Spring ‘23 term at UWES!!!
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Author’s Commentary
Canadian Macroeconomic Conditions – May 2023
The Canadian economy entered 2023 on a better footing than most of its peers, with strong economic fundamentals including robust population growth, a strong labour market, and a well-regulated and well-capitalized financial system. However, the combined impact of slowing global growth and aggressive monetary tightening by the Bank of Canada will weigh on Canada’s economy in 2023. Despite this, global demand for and high prices of Canadian commodity exports like energy and wheat will continue to support exports.
The government has released Budget 2023 which will deliver new targeted inflation relief for Canadians who need it most, stronger public health care including dental care for millions of Canadians, and significant investments to build Canada’s clean economy. The budget aims to address the affordability challenges faced by many Canadians due to higher grocery prices and housing costs.
In 2022, Canada’s GDP growth was estimated at 3.5%. The economy was sustained by a strong job market recovery, household savings, high commodity prices, an increase in business investment and the strong demand for services unleashed after COVID restrictions were lifted. However, in 2023 the economy is set to slow down due to the Bank of Canada’s fight against inflation to bring an overheating economy under control.
Despite the slowdown in growth, Canada’s economy remains resilient. Since 2015, close to 2.7 million fewer Canadians are living in poverty and income inequality has continued to fall. The labour force participation rate for women aged 15 to 64 years is at record highs and young Canadians have access to a greater number of good-paying jobs than before the pandemic. Significant investments in infrastructure and in the capacity of the Canadian economy will continue to benefit Canadians for decades.
News and Noteworthy
Microsoft’s Activision takeover approved by EU after UK veto
The European Union has approved Microsoft’s proposed $69 billion takeover of Activision Blizzard, which had previously been vetoed by the UK over concerns that it would hurt competition in cloud gaming. The European Commission said that Microsoft’s promise of 10 years of free licensing deals would ensure there would be fair competition in the market. Microsoft and Activision still need approval from regulatory bodies in the UK and US. The US Federal Trade Commission filed a lawsuit in December to block the deal, and a judge’s decision is unlikely before the end of the year. Read more.
Janet Yellen warns of debt ceiling ‘catastrophe’
US Treasury Secretary Janet Yellen has warned of an “economic and financial catastrophe” if Congress fails to raise the US’s debt ceiling. Without an agreement to increase the federal government’s borrowing limit, it could run out of money by early June, and might not be able to make wage, welfare, and other payments. President Biden will meet Republican leaders on Tuesday to ask them to agree to raising the current $31.4tn limit. Congress typically ties approval of a higher debt ceiling to stipulations on budget and spending measures. Ms. Yellen warned that failure to find cross-party agreement on the issue could result in a “constitutional crisis.” Read more.
Vice Media Group files for bankruptcy protection
On May 15, 2023, Vice Media Group, which includes websites such as Vice and Motherboard, filed for bankruptcy protection to sell its assets to a consortium of lenders, including Fortress Investment Group, Soros Fund Management, and Monroe Capital. The consortium will provide about $225 million in the form of a credit bid for almost all of the company’s assets and also assume significant liabilities at closing. Vice has listed both assets and liabilities in the range of $500 million to $1 billion, according to a court filing. Vice Media Group has faced financial difficulties and top executive departures. The recent round of job and programming cuts at the media group led to bankruptcy protection. Under the protection, business will continue to operate as Vice Media Group is sold to the consortium of creditors. Read more.
Demographic Dividends: How Canadians Can Invest in India’s Growth
Morningstar Canada has highlighted India as an investment opportunity for Canadians looking for emerging markets with growth potential. India’s demographic dividend, with a majority of its population under 35, is expected to fuel growth in industries such as e-commerce, consumer goods, and financial services. Canadian investors can access Indian markets through mutual funds and ETFs, although investing in individual Indian companies can be challenging due to regulatory restrictions. Morningstar Canada recommends investors consult a financial advisor before making any investment decisions. Read more.
India’s Go First backs emergency arbitration in Pratt & Whitney dispute
Indian low-cost carrier Go First has backed emergency arbitration in its dispute with Pratt & Whitney over aircraft engine issues. Go First has been forced to ground many of its Airbus A320neo planes due to technical issues with the Pratt & Whitney engines, leading to flight cancellations and disruptions. Go First has now initiated emergency arbitration with the Singapore International Arbitration Centre to resolve the issue and obtain compensation from Pratt & Whitney. This move could potentially result in faster resolution of the dispute than going through a conventional arbitration process. Read more.