The stimulus has to pass through the innovation

La relance doit passer par l’innovation

Renaud Philippe Is The Duty
Some industries, like residential construction, could see a recovery more rapid. On the photo, a construction worker equipped with a visor to Montreal.

With the shutdown of several sectors of the economy, the pandemic will force the reflection on options disaster recovery : restart or re-invent ? In a series that started on Wednesday, The Duty is associated with the journal Management and publishing parts of a special folder on these crucial issues. Today, the fourth text four : after the containment, recovery.

The pandemic of COVID-19, and the ordinances of containment enacted by the governments gave to a screeching halt in large swathes of the global economy. The recovery will thus require skill and imagination in a context full of challenges.

The minister of Economy and Innovation of the city of Québec, Pierre Fitzgibbon, expects a gradual recovery and variable according to the sectors of activity. Tourism, air transport and the field of culture may take some time to relaunch. Other sectors, including information technology, life sciences and residential building could resume more quickly. “We’ll have to determine the sectors that have economic effects major and revitalizing, supports the minister. The needs will be even more in the recovery than during the confinement. “

Mr. Fitzgibbon also points out the importance of the restart of the manufacturing sector, which may need to do a redesign of supply chains, since the current crisis has revealed the vulnerability of the chains are highly globalized. This sector could also have to wait before we see global demand rise again, in addition to absorb additional costs associated with the introduction of new health standards.

It will be important also to find a balance between the stimulation of the stimulus and the debt overhang. Mr. Fitzgibbon acknowledges, however, from the outset, that the States will need to revise their approach to the balance of public finances based on the immense needs to be met.

Oxygen for businesses

Quebec and Ottawa are keen to financially support the companies that posted profits before the crisis. If these companies were to concatenate bankruptcy, this will bring these countries of thousands of unemployed workers and plomberait the stimulus. The canadian Federation of independent business (CFIB) estimated that approximately one-third of SMES are forced to suspend their activities due to the pandemic could disappear.


See the complete file of the journal “Management”

“A lot of small companies generate a profit margin of less than 3 %, recalls Gopinath Jeyabalaratnam, senior policy analyst with the CFIB. Without support, they will not survive. “The quebec government has established an emergency assistance programme for SMES. It provides funding of less than $ 50,000 in the form of a loan or loan guarantee. At the federal level, the urgency for canadian companies allows you to borrow up to $ 40,000. The CFIB would prefer grants rather than loans.

Stéphane Paquet, president and ceo of Montréal International, reminds us of the importance of supporting companies of size more imposing. Often, these are the major contractors who are working the smaller SMES, particularly in the manufacturing and technology sectors. “Quebec has to build on its strengths, such as video games and artificial intelligence “, he says.

There is no shortage of capital

Good news : the money to support the business is available. The Caisse de dépôt et placement du Québec has provided a budget of 4 billion dollars to support all companies during the crisis and to fuel their recovery. The concerted action Programme temporary business (PACT), managed by Investissement Québec, is intended to provide funds to businesses affected by the impact of the pandemic. The federal government multiplies the assistance measures.

The banks and the Desjardins group would also have to contribute to this effort. “The big difference compared to the 2008 crisis, it is that it comes not from the financial world, but a virus. Therefore, the banks do not have liquidity problems “, points out Vittorio Pellegrino, president of banking for Quebec and eastern Ontario BMO. “There’s capital to support the business “, he adds.

The Bank of Canada has also played a decisive role in this sense, for example by decreasing its rate to 0.25 %. But this is mostly his programs to purchase securities and financial products which come to the attention of Mathieu D’anjou, deputy chief economist at Desjardins. The Bank of Canada will redeem federal bonds with a value of at least $ 5 billion every week until the recovery has started. A similar initiative aims to provincial Treasury bills. The canadian government will also gain up to $ 50 billion of insured mortgage pools. “Without all this, the rate on loans in banks and the insurance companies would have increased and we would have seen a tightening of credit that would have been detrimental to the recovery,” notes the economist.

Overcome the uncertainty

The economic recovery unfolds according to the dynamic domestic and international very different from those of before the pandemic : fear of new outbreaks of the virus, changing the behaviour of consumers, transformation of global trade and supply chains, etc

In such a context, Mr Fitzgibbon believes that the recovery will depend on innovation. The québec government wishes to see the companies modernizing to become more productive ; it also intends to reduce the trade deficit of Quebec. The crisis has highlighted the dangers of too great a dependence on imports, particularly in crucial sectors such as health and food.

However, Quebec has no intention of withdrawing into itself, even as its economy needs to export and to attract foreign investors. The united Nations predicts a reduction of 30 % to 40 % of foreign investment in the world in 2020 and 2021. “Last year, investment from the outside has reached $ 2.6 billion in the Greater Montreal area, so it would mean a decrease of at least $ 700 million. It is a lot, ” concedes Stéphane Paquet.

Montreal international remains hard at work to attract investors. This organization has increased its number of virtual visits of foreign subsidiaries established on the territory of the Greater Montreal. Given the cancellation of major trade fairs such as Farnborough (Uk), devoted to aeronautics, dating more direct with companies whose profile is suitable to the Greater Montreal will be crucial. “We are focusing on new targets in sectors in the current context, for example in health sciences, or digital technologies,” continues Mr. Paquet.

Quebec has, therefore, advantages in hand to succeed in its recovery. “Quebec’s public finances were in good condition before the crisis and Quebec can count on an economy diverse enough,” stresses Mathieu D’anjou. The challenge is however to ensure that everyone returns to work and can once again patronize the shops without causing a resurgence of the virus. As long as we have not found a cure or a vaccine against the COVID-19, the economic health of Quebec will remain so, also, under high surveillance.

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