indicatorThe Owl

A koala, tarantula, grizzly and hippo walk into a bar

We’ve been told all along that restarting the economy isn’t a light switch that goes on-and-off—it’s more of a dimmer switch.

By ATB Economics 4 June 2020 3 min read

The initial shock of the COVID-19 crisis is behind us and Canadian businesses are gradually starting to reopen. What can we expect in the months ahead from an economic perspective? Here are four possible scenarios:

The koala—A koala is possibly the most adorable creature on the planet. It’s also mostly harmless. In the koala scenario, we relax, let the economy reopen and...nothing bad happens! The COVID-19 virus simply goes away and things get back to normal almost overnight. But scientists are telling us that the COVID-19 virus is highly unlikely to simply disappear and economists are warning that the economic pain will linger. 

The tarantula—They look terrifying, but they are largely harmless to humans. (Tarantulas got their bad reputation from Hollywood.)

In the tarantula scenario, we discover that the economic damage going forward, while significant, is not going to be as bad as we feared. Slamming shut Alberta’s economy for a few months caused a lot of short-term pain, but the economy will rebound relatively quickly.

This scenario is also unlikely. With 2020 on track to be one of the worst economic years in Alberta’s history, it’s going to take time—potentially several years—to climb out of the hole dug during the lockdown.

The grizzly bear—They may appear cute and cuddly in photos, but any prudent hiker knows coming face-to-face with a grizzly bear is terrifying. If you make a wrong move, the bear will rip you to shreds. But if you do what experts advise and back away calmly and slowly, the bear is more likely to scamper away and leave you unharmed.

The grizzly bear scenario has essentially been in play since March. Most Albertans have been reacting with the appropriate fear and respect—like the hiker backing away from the bear. We don’t know for sure, but hopefully the precautions we have taken by closing parts of the economy and allowing only a gradual reopening will result in a non-fatal economic outcome and a decent rebound in 2021.

The hippo—The song “I want a hippopotamus for Christmas” implies that hippos are friendly. But don’t let their bumbling appearance fool you—hippos are deadly to humans. In the hippo scenario, Alberta’s economy is ravaged because we don’t take adequate precautions going forward and the virus comes back with a vengeance. That, like a hippo attack, could be fatal, sending the economy into a multi-year recession.

Which economic scenario will it be? The koala, where everything snaps back to normal without much effort? The tarantula, where the negative economic effects going forward are not as scary as we thought? The grizzly bear, where we react with fear and respect but eventually come out of it okay? Or the hippo, where we ignore the warnings and the economy gets trampled again?

The koala is the most desirable, but the least likely. The tarantula scenario would also be great, but it will take time to repair the economic damage brought on by COVID-19. The hippo is possible, but, at least so far, most Albertans have proven they’re (mostly) willing to take precautions.

That leaves the grizzly bear as the most likely scenario. We’ve encountered a deadly animal on the trail, but we’re doing what we’re supposed to do—slowly and carefully backing away. The grizzly could still attack, sending the global and Alberta economy into a longer, multi-year tailspin. Yet chances are better that the bear will turn and run away. This year is still going to be brutal, but if we are prudent, 2021 holds the promise of a gradual economic recovery for Alberta.

This is an abridged version of an article on toddhirsch.com.

The grizzly could still attack, sending the global and Alberta economy into a longer, multi-year tailspin.

The grizzly could still attack, sending the global and Alberta economy into a longer, multi-year tailspin.


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