While the world has seen quite a few economic crises, both global and local, the current situation is different to all of them, triggered as it has been by a pandemic. COVID-19 has meant that a number of small businesses all over the world have been hit the worst, and these were the ones who were struggling before the pandemic hit as well. With wafer-thin margins and small client bases, the fact that people cannot safely step out of their homes has led to a huge drop in revenues across the board, causing millions of people to lose their jobs and small businesses to shut down. A recovery will require the use of tools and tricks which are new, since the old ways of coping with a financial crisis may not be effective in this instance.
It has already been seen that small businesses have seen twice as many job losses as larger businesses during the crisis, and so any recovery plan needs to focus on them first. In Canada, 98% of employers are small businesses, which shows just how necessary it is to help these enterprises out, especially as a recent survey by the Canadian Federation of Independent Business recently found that one in seven small businesses could go bankrupt due to the impact of the crisis. This will have a snowball effect, as jobs will be lost, not to mention the loss in tax revenue and the drop in GDP that will follow. It is therefore essential that small businesses form the focus of any recovery plan in Canada.
The Canadian economy is expected to contract by 6% in 2020, but the expectation is that there will be an almost immediate rebound, with 6% growth projected for 2021. The likelihood of this rebound will depend on the success of any recovery plan. Research has shown that there are a few key areas which can help the economy to rebound faster than expected.
For starters, businesses in Toronto and its surroundings should not be hit too badly, as the region continues to show growth despite a slow reopening. Elsewhere, it will be important for the government to focus on the digital economy and technological solutions, as these have been resilient in the face of the pandemic. Online businesses and service providers have seen an increase in demand, as people who cannot step outside their homes turn to the internet for their needs. We have even seen traditional physical businesses turn to the internet to continue to provide their services to customers. For example, casinos have been shut in the country since March, but many operators have created new Canadian casino online websites to try and continue operations and provide a similar experience to customers as far as possible. Land-based casinos in Canada will therefore be well-advised to focus on their online presence as well, as the popularity of this medium will not go away anytime soon. This is a part of the wider technological trend in the Canadian economy. The IT and communications sectors contributed 4.8% to Canadian GDP in 2019, and increased to over 5% in 2020. These tech solutions have been utilised across sectors, from agriculture to financial services, showing just how widespread their impact on the economy can be if given the right support.
Manufacturing will be another significant sector to focus recovery efforts on. Many businesses have responded quickly to the changing environment by moving to new products, and altering their supply chains to be able to meet the demand for those new products. Healthcare products such as personal protective equipment is the best example of this, as many businesses have pivoted to manufacture PPE where possible. This shows the need to be agile and efficient, and the government will need to ensure that the right environment is provided to companies to allow them to thrive in this new scenario.