Bill Morneau is warning that the coronavirus outbreak will have a significant impact on the Canadian economy, hitting the tourism and petroleum industries particularly hard.
The Finance Minister said he expects the economic fallout from the outbreak, which has killed more than 1,000 people and infected tens of thousands, will be a major topic as he attends meetings in the coming weeks with Group of 20 finance ministers and central bank governors.
“I do want to acknowledge that the virus is undoubtedly going to have an economic impact,” Mr. Morneau said Monday during a speech in Calgary. “We know the impact is real. It’s going to be felt across the country but perhaps even more so here in the oil and gas sector.”
Mr. Morneau said the exact economic toll of the outbreak isn’t clear. He added the health risk to Canadians remains low.
The spread of coronavirus has prompted fears about the potential economic impact both inside and outside of China, where the outbreak began. Oil prices have fallen 15 per cent in the past three weeks, as refineries in China curtail production to reflect lower requirements for fuel in the country, and the Canadian dollar is at a four-month low.
The tourism industry is also coping with travel advisories and flight cancellations, which have further reduced demand for fuel, and the Chinese manufacturing sector has been hit by plant closings.
Last week, Carolyn Wilkins, the senior deputy governor of the Bank of Canada, included the coronavirus in a list of risks to the global economy. She also cited the United States-China trade war and renewed tensions in the Middle East.
The Bank of Canada estimated the impact of the 2003 SARS outbreak was about 0.1 per cent of gross domestic product, but also that most of that was later reversed. In contrast to SARS, which killed 44 people in Canada and led to advisories against travel to Toronto, there have only been a handful of coronavirus infections in this country so far.
Michael Tran, commodity strategist with RBC Capital Markets, expects the demand slump for refined products such as jet fuel and gasoline to continue.
“The data continues to look less-than-rosy over the course of the next several weeks," he said, adding that the long-term effects will depend on how quickly the outbreak can be contained.
“A lot of people in the oil market are looking for a major line in the sand, such as some announcement from the World Health Organization saying they’ve found a vaccine or flags that would suggest things are turning for the better – or for worse."
Laura Lau, a senior portfolio manager with Brompton Funds, said supply chain delays are another problem. The Lunar New Year, in late January this year, usually prompts a two-week cooling-off period for goods manufactured fully or partly in China, but she expects that to last four to six weeks this year because of quarantines.
Numerous airlines, including American Airlines Inc. and British Airways, have suspended flights to China in the wake of the outbreak. In January, Air Canada cancelled all direct flights to Beijing and Shanghai until Feb. 29. China has been an important growth market for the carrier, which operates 33 flights a week to the country, and its shares have fallen around 11 per cent over the past month.
Canada is a popular destination for Chinese tourists, too. The number of visitors from China doubled between 2013 and 2018 to a record 737,000, according to Destination Canada, a Crown corporation that markets the country as a tourist destination.
Royce Chwin, chief executive officer of Travel Alberta, the province’s tourism promotion arm, said he is “aware of postponements and cancellations, primarily in popular hot spots in the Rockies.” The organization cancelled its marketing efforts in China last month as a result of the coronavirus.
“Longer term, we are not seeing cancellations for the spring and summer months at this time,” Mr. Chwin said in an e-mail. “With the situation continuing to evolve, it is too early to quantify the impact this may have on Alberta tourism.”
With a report from Joe Castaldo in Toronto
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