Significant pressure will come from mounting insolvency filings and unemployment
The risks to Canadian finances will remain pronounced even during the recovery phase once the coronavirus crisis passes, according to Deloitte Chief Economist Craig Alexander.
“One of the great legacies of the current crisis is that after the pandemic has passed, we’re going to have more indebted households,” Alexander told Yahoo Finance Canada earlier this week. “So I think the issue around leverage isn’t going to go away; in fact, I think it will become more acute.”
Compounding the issue is the still-climbing number of insolvencies across the country, which already reached a record high even before the COVID-19 pandemic took hold of the global financial system. Mounting unemployment is also placing many households’ long-term economic prospects in doubt.
However, Canadians might find a measure of respite: Susan Hosterman of Fitch Ratings said that so far, the impact of the coronavirus is not likely as severe as that observed in the United States more than a decade ago.
“I definitely feel like we’re not going to see the delinquency rates that we saw in the US during the financial crisis. It’s not going to be anywhere near that,” Hosterman said. “I don’t think we’ll see those levels with just how proactive the banks are being with working with the borrowers.”