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In Covid's wake: 'zombie economy' or real rebound?

Government supports for NWT businesseslaid low by pandemic disru
Government supports for NWT businesseslaid low by pandemic disruptions have been much appreciated but theyalso give a false impression of a strong economic recovery, said NWTChamber of Commerce President Jenni Bruce. Blair McBride/NNSL photo

Just over one year since the NWT has been in the grips of the Covid-19 pandemic, the territorial economy has emerged in better shape than other Canadian jurisdictions, but challenges persist.

Pandemic disruptions played a role in one in four NWT businesses losing revenues of more than 30 per cent in 2020, compared to one in three businesses across Canada, according to Statistics Canada’s quarterly Business Conditions Survey in March.

The NWT's employment rate has also bounced back from its record low in June 2020, to exceed the rate of people working in the months before coronavirus hit the territory, as the March Labour Force Activity report showed.

The economy has managed to stay intact until now, but with many twists and bumps along the road, explained Jenni Bruce, president of the NWT Chamber of Commerce.

'Zombie economy'

Bruce is somewhat skeptical of statistics showing the NWT economy has pulled through, or even come back stronger.

Government supports for NWT businesses laid low by pandemic disruptions have been much appreciated but they also give a false impression of a strong economic recovery, said NWT Chamber of Commerce President Jenni Bruce. Blair McBride/NNSL photo

“We are currently operating in a zombie economy where many of our hardest hit sectors are operating purely on relief funding (grants, Canada Emergency Wage Subsidy, deferred loan payments) with many now going over a year without revenue,” she said.

“Once these reliefs stop, several businesses will not have the ability to carry on, (even) more so now that the GNWT has introduced the minimum wage increase. Once those supports are gone, there will be several businesses, specifically in the food and beverage sector that will shut down for good. There is also a false understanding that we are now doing better than we were. (That) is false, as the employment growth is all GNWT staff, which provides a false boosting as many of those positions are in relation to the Covid-19 Secretariat and thus term (jobs).”

Supports are a life line

And yet Bruce credits many of those supports for preventing a worse outcome for NWT businesses.

GNWT grant programs, the wage top-up scheme, postponement of paying federal taxes, the Northern Business Relief Fund, funding for aviation companies and the Canada Emergency Wage Subsidy, which brought employees back to work, all helped inject some life into the business environment.

The quick measure last May of permitting restaurants to do take out and delivery of alcohol helped those establishments while they remained closed.

The GNWT itself responded effectively in the first weeks of the pandemic to assist businesses that had to close down, Bruce said.

The territorial government moved last spring to set up the 17-member Business Advisory Council (BAC) to provide guidance to the GNWT on economic recovery, although it was criticized by MLAs for being slow to start and for its “secretive” nature.

Economic response slowed

“As more 'chefs entered the kitchen,' so to speak, everything came to a grinding halt,” Bruce said. “As we moved closer to May, it went from being proactive to reactive in responding. We had attempted to work with the GNWT to put together a reopening safely booklet so that businesses had lead up time to prep their business for opening but once again were scrambling as the business community was given 24-hours notice of what was required of them to open.”

The biggest issue affecting economic recovery for the chamber has been communication with the GNWT.

A lack of transparency, reluctance to comment and miscommunication have left businesses confused as to next steps in recovery or dealing with Covid-19.

Frustration with GNWT

“One year later, we are still waiting for things like a contact tracing/exposure plan for businesses who have had a possibility of contact tracing,” Bruce said.

The patience of some people in the business community wore thin in January, when the BAC, which Bruce co-chairs, opted to suspend meetings out of frustration that Premier Caroline Cochrane's executive council wasn't sufficiently focused on economic recovery.

Bruce appreciates that Covid-19 has been the first pandemic in living memory and that everyone has “essentially been building the plane as we were flying it.” The chamber also acknowledges the sincere efforts of the government in addressing the economic fallout of Covid-19.

However, almost 13 months into the pandemic, Bruce doesn't feel the GNWT has learned its lesson in regards to communication, transparency and being proactive.

“The communication plan for the GNWT needs a serious overhaul,” she said.

Communication could improve: Wawzonek

Finance Minister Caroline Wawzonek concurs with Bruce, to a degree, on the communications problems.

“We can always do better,” she said. “I know there is some desire to have a clearer sense of the Emerging Stronger strategy. There is a balance to be struck between fleshing out an idea and getting it out to the public versus ensuring you're doing enough planning and analysis so that it's clear and certain enough. I appreciate that businesses can't plan if they don't have the information.”

A drill machine works at the Nechalacho Rare Earth site about 100 km southeast of Yellowknife. Catching the wave of economic recovery involves tapping into 'green recovery', such as the mining of rare earths that can help develop technology for alternative energy generation, said Wawzonek. Chris Pedersen photo, courtesy of Cheetah Resources Ltd.

Overall, Wawzonek thinks the NWT fared well in tackling the economic challenges of Covid-19. However, she's mindful that some business sectors have performed better under the difficult conditions of the last year than others, such as tourism and hospitality, which have suffered disproportionately.

The territory also performed well with the help of Covid-19 assistance programs – and will need more support.

“We'll continue working with the federal government, advocating with the federal government, filling in the gaps but also looking at areas that need to be addressed,” the minister said.

Relief and recovery

Looking at the current state of the economy, Wawzonek categorizes the remaining economic challenges into two stages: relief and recovery.

Tourism and hospitality are still in the relief stage and the challenge is navigating the uncertainties those industries face and figuring out how to help them.

Other sectors, like mining and exploration are in a recovery stage.

“The challenge is catching that recovery. There is talk of a green recovery, we want to catch that with exploration potential. We want to catch that wave,” she said, referring to rare earth mining and other minerals needed to develop alternative energy sources.

Economy not in a bubble

Pointing to Statistics Canada data showing the territorial economy is improving in some respects, Wawzonek disagrees with the notion that relief funding is propping up a weak economy.

“I don't think we're in a bubble, however, when comparing with the rest of Canada, they've had second and third lockdowns. I want to be cautious of who we're comparing ourselves to,” she said, adding that a lot of the NWT's initial losses were due to the closure of the Ekati diamond mine, which has since reopened. “There is an uneven recovery.”

Long-term view

Wawzonek said the priority of the NWT economy should be on preparing for a future in a decade or more, when the diamond mines might close.

In the medium-term, the mines will continue to operate, tourism will return and the mine remediation economy has potential to develop.

“Are we able to utilize the fact of the pandemic to create some momentum and motivation to act on those things?” she asked. “Are we doing enough right now in recovery so that the 10-year mark won't be an economic hit to the NWT?”

A drill machine works at the NechalachoRare Earth site about 100 km southeast of Yellowknife. Catching thewave of economic recovery involves tapping into 'green recovery',such as the mining of rare earths that can help develop technologyfor alternative energy generation, said Wawzonek. Chris Pedersenphoto, courtesy of Cheetah Resources Ltd.