Every week during the coronavirus crisis, CCDF will be providing its clients with an economic update to help them understand the wider economic implications and better plan their own recovery.
This week, we focus on the stimulus strategies of the federal and provincial governments.
What is economic stimulus? Stimulus measures are coordinated and deliberate efforts by governments to stimulate the economy and incentivize growth. Stimulus measures usually fall into two categories: monetary stimulus, which involves lowering interest rates and quantitative easing (adding money directly into the economy); and fiscal stimulus, which involves increased government spending or lowering of taxes.
The nature of the COVID economic crisis – a temporary, but deep, cut to spending and productivity – means that stimulus measures are both critical and likely to be impactful. The main tools available to the federal government include interest rate cuts, expanded access to credit, payment deferrals, spending increases, and direct transfers to workers and consumers.
What are Canada’s stimulus measures aimed at addressing? The primary economic challenges arising from the COVID crisis include productivity losses, supply chain disruptions, major labor dislocation, and significant financial pressure on both businesses and households. The government’s main consideration will be to: (1) reduce the impact of these challenges; and (2) get the economy back to normal as soon as public health considerations allow for it.
So what is the Government of Canada doing? Last week, the Government of Canada unveiled a $52 billion stimulus package, in addition to enhancing access to credit. It is likely they will announce more targeted supports on an ongoing basis to ensure the Canadian economy recovers sooner rather than later. The major features of the current package with regards to small and medium businesses include:
- A 75% wage subsidy program for qualifying businesses, for up to 3 months, retroactive to March 15, 2020. It is open to any business, big or small, along with charities and not-for-profit organizations, that has have suffered at least a 30% decline in revenue because of the COVID crisis. The subsidy applies to the first $58,700 worth of salary; so the maximum amount of subsidy would be $847/week. Details on how to apply will be coming in the next 1-2 weeks.
- A Work-Sharing program to help employers and employees avoid layoffs by providing income support to employees eligible for Employment Insurance benefits who work a temporarily reduced work week while their employer recovers. The application is already open as it based on an existing federal program for steel and forestry sector businesses.
- The Canadian Emergency Response Benefit (CERB) of up to $2000/month for four months for workers who lose their income due to the COVID crisis. Amongst other categories, this program applies to workers who are still employed, but are not receiving income because of disruptions to their work situation due to COVID-19. This is designed to help businesses keep their employees rather than lay them off, to ensuring they preserve the ability to quickly resume operations as soon as it becomes possible.
Access to Credit
- A Business Credit Availability Program (BCAP) will provide $65 billion of additional support through the Business Development Bank of Canada (BDC) and Export Development Canada (EDC). The program will become functional in the next three weeks; businesses should work with their existing lenders and financial institutions to access it. It includes:
- A Canada Emergency Business Account to provide interest-free loans of up to $40,000 to small businesses and not-for-profits, to help cover their operating costs during a period where their revenues have been temporarily reduced.
- Loan Guarantees (via EDC) and a Co-Lending program (via BDC) for small and medium-sized enterprises of up to $6.25 million.
- Support for farmers through Farm Credit Canada by providing an additional $5 billion in lending capacity to producers, agribusinesses, and food processors.
Deferral of Payments
- Businesses can defer, until August 31, 2020, the payment of any income tax amounts that become owing on or after March 18 and before September 2020. This relief applies to tax balances due, as well as instalments.
- Businesses can defer until June 30, 2020 payments of the Goods and Services Tax / Harmonized Sales Tax (GST/HST), as well as customs duties owing on their imports. This applies to GST/ HST remittances for the February, March and April 2020 reporting periods for monthly filers; the January 1, 2020 through March 31, 2020 reporting period for quarterly filers; and for annual filers, the amounts collected and owing for their previous fiscal year and instalments of GST/HST in respect of the filer’s current fiscal year.
Is the Government of Saskatchewan doing anything like that? Provincial governments have no monetary policy options, and employment insurance is a federal responsibility. However several provinces have put in policies that complement federal initiatives. Increased provincial stimulus spending, for example on public infrastructure, is likely another option they are considering.
For now, the Government of Saskatchewan’s response for businesses has consisted of the following:
What programs are available for workers? In addition to business supports, the federal government has expanded supports to workers who have been laid off, and to all Canadians who will be experiencing financial distress due to the COVID crisis. These include income support measures, tax filing extensions, additional payments through GST credit and child benefit programs, a 6 month moratorium on repaying student loans, and, alongside financial institutions, mortgage and loan deferrals.
The provincial government is also providing some income support in the form of a self-isolation support program, and student loan deferrals for six months.
What programs will work best for my business? CCDF is offering all of its clients up to $10,000 for professional assistance, through its Business Support Program, to navigate these difficult times, and has retained a number of consultants to help you with your specific needs. Areas of support include identifying and applying for government supports, addressing HR issues, acquiring economic intelligence and financial management advice, and more. Call your CCDF Business Development Specialist to access this program right away, and better understand what supports and strategies will work best for your circumstances.
What are some good resources to learn more? Morris Interactive has compiled a list of free resources that will provide up to date economic information during the coronavirus crisis. You can view those resources here.
Document Prepared by Morris Interactive
www.morrisinteractive.ca • email@example.com • Ph. 1.866.955.3006