World News

Coronavirus could hurt already vulnerable global economy: Bank of Canada

By Kelsey Johnson

OTTAWA (Reuters) – An outbreak of coronavirus that has rattled financial markets and infected thousands in China could hurt Canada’s economy by disrupting supply chains and depressing oil prices, a top Bank of Canada official said on Wednesday.

“It’s never a good time to have an outbreak like this, but when the global economy is feeling a little fragile, (and) we’ve got mixed data in Canada, it’s certainly not great timing,” Senior Deputy Governor Carolyn Wilkins told a business audience in Toronto.

The central bank has held its key interest steady since October 2018 but said last month a cut was possible if a recent slowdown in domestic growth persisted.

The Canadian dollar <CAD=D4> held near a two-month low after her remarks, down 0.1% at 1.3286 per U.S. dollar, or 75.27 U.S. cents.

China said another 65 people had died in the previous 24 hours, in the highest daily total yet, taking the overall toll on the mainland to 490.

Canada has five cases of coronavirus. Ottawa is trying to evacuate some 300 stranded citizens.

Wilkins said past virus outbreaks – like an episode of Severe Acute Respiratory Syndrome that killed 44 people in the Toronto area in 2003 – showed Canada’s economy could be affected even if the epicenter was not domestic.

“It can come through lower oil prices, lower commodity prices – we see a bit of that,” she said, adding that some supply chains could be disrupted.

Tourism and transportation sectors could “find themselves a little offside their forecasts for a little while” because of lower travel, she said.

Financial markets have been spooked by the potential for the impact of the outbreak on China’s economy, the world’s second largest, to reverberate around the globe.

On Wednesday, European Central Bank executives said the coronavirus was adding to global economic uncertainty, but its impact may be short term and temporary, limiting the need for policy action.

Wilkins appeared to echo that position. She said the bank would need to dissect short- and longer-term outcomes depending on the outbreak’s duration.

“If it lasts longer then we’d have to think about what risk management looked like in that space,” Wilkins said. That assessment would be data-dependent and look at business investment and consumer spending.

“We already said that we’re looking at all those data and it just means that we’re going to have to concentrate more on it,” she said.

(Reporting by Kelsey Johnson, additional reporting by Fergal Smith in Toronto; Editing by David Gregorio and Lisa Shumaker)