It could take up to five years to get back to normal: David Rosenberg
Anyone hoping for a semblance of a normal economy might be left waiting up to five years, according to influential economist David Rosenberg of Rosenberg Research and Associates.
“It’s going to take years – maybe three, four, five years to even get back to normal, and that’s assuming we get a vaccine,” he said in an interview with BNN Bloomberg Monday.
Provincial economies and businesses have been slowly reopening but the rebound all hinges on consumer demand returning, which at this point is still lagging, he said.
“The vast majority of the population in surveys they’re showing are people are very hesitant to go out and shop like they did before, so we’re going to have this huge gap between the demand side of the economy and the supply side of the economy,” he said. “Nothing is going to return to even quasi-normal without demand. You can talk all you want about reopening the economy – the question is when is demand going to come back.”
“The only game changer is a vaccine,” he added.
The race is on between pharmaceutical companies and government research bodies around the world to develop a vaccine for COVID-19.
While there have been some promising early clinical data, experts still estimate a viable vaccine could take 12 to 18 months to develop.
Demand is typically more elastic than supply and reacts quicker in the event of an economic shock, and in the case of COVID, the demand destruction has been on a global scale.
Rosenberg also warns the return of consumer spending will likely be hampered by high debt loads, especially in Canada, where alarm bells were already sounding over the problem before it entered the COVID-19 economic crisis.
He also believes it’s almost a certainty Canada will lose its coveted AAA credit rating as government relief programs dramatically increase the country’s liabilities.
However, he doesn’t see this being the case forever.
“Demand at some point will stabilize. Either we’ll get a vaccine, we’ll get some effective treatment or this will burn through the population like [other viruses] did in 1918 or 1990. We will in a few years have demand stabilize at a lower level,” he added.