Gloomy economic scenario drives S&P/TSX Composite Index down another five percent

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      This was a day when some investors might have been ready to set their hair on fire.

      It began with the release of the Office of the Parliamentary Budget Officer's report laying out a dismal financial scenario resulting from the COVID-19 pandemic and oil-price shocks.

      The office's analysis assumed that COVID-19 social-distancing and self-isolation measures will remain in place until August and that OPEC countries will not limit oil production.

      Under these conditions, the office forecast that the country's unemployment rate would rise to 15 percent in the third quarter.

      The annual federal deficit would reach the unheard-of figure of $112.7 billion by the end of the fiscal year—an astonishing 5.2 percent of GDP.

      In addition, the office anticipated that Canada's real gross domestic product would shrink by 5.1 percent by year-end.

      That would mark the weakest performance since 1962 when the Cuban Missile Crisis occurred. The first six months of that year have been referred to as the "Kennedy Slide" and the "Flash Crash of 1962".

      In the meantime, Canada's economy is being hammered by declines in oil prices.

      Western Canadian Select plummeted to a record low of US$4.58 this morning. That led analyst Matt Murphy to tell Canadian Press that up to 20 percent of thermal bitumen production could be shut down in Canada in the coming months.

      The Parliamentary Budget Office expects prices of Western Canadian Select to remain between US$13 and US$15 per barrel through the end of 2020. That's nowhere near the price that producers need to turn a profit.

      All of this news sent the benchmark S&P/TSX Composite Index plunging by another 5.11 percent today to close at 12,687.74.

      That's down a whopping 28 percent from its all-time high, recorded on January 23 in intraday trading. (This index is comprised of about 250 companies.)

      Trudeau boosts wage subsidies

      The dire economic situation prompted Prime Minister Justin Trudeau to announce new measures to prop up businesses.

      The federal government will subsidize qualifying companies with 75 percent of employees' wages for up to three months, retroactive to March 15.

      That's sharply up from a previously announced wage subsidy of 10 percent.

      All businesses, including the self-employed, have also been permitted to defer all GST and HST payments and customs duties for imports until June.

      “Small businesses are the backbone of our economy, and an important source of good jobs across this country," Trudeau said. "They are facing economic hardship and uncertainty during the COVID-19 pandemic, and that is why we are taking action now to help them get the financial help they need to protect their workers and pay their bills.”

      Another $25 billion has been set aside to provide interest-free loans to small businesses. And a new Small- and Medium-Sized Enterprise and Loan Guarantee program will be available through Export Development Canada and the Business Development Bank.

      "This is intended for small and medium-sized companies that require greater help to meet their operational cash flow requirements," the prime minister's office stated on its website.