Northern Economist 2.0

Friday 14 August 2020

Putting a Dollar Figure On the Cost of COVID-19 in Ontario


It is said that economists know the price of everything but the value of nothing.  Nevertheless, such sentiment like this does not stop economists from looking at costs and as Ontario’s COVID-19 pandemic declines and enters a lull, it is worth assessing what the cost of the pandemic to date has been.  As the accompanying figure illustrates, after just over 200 days since the first case in Ontario, we appear to be on a downward trend in terms of new daily cases.  Indeed, the daily growth rate is currently at 1/10 of one percent but relapses are likely.  As of August 14th, we are at a total of 40,459 cases with 2,788 deaths - with over 80 percent of them early on in the province’s long-term care homes.


 
Everyone is pretty much aware of the economic and fiscal impact of COVID-19 on the country given the estimates of the annualized drop in Canadian GDP this year ranging from 6 to 8 percent, the 13 percent unemployment rate and the $343 billion dollar federal deficit.  Ontario this week released its first quarter finances and the picture was grim with a projected deficit for 2020-21 of $38.5 billion and a drop in real GDP of 6.6 percent this year. 

The provincial government’s revenue is actually only projected to be $5.7 billion lower from the March update at $150.6 billion (though it was at $156.7 billion in 2019-20) but program expenses, COVID-19 assistance and contingency funds are up dramatically – reaching a total of $186.7 billion to deal with the pandemic.  From total spending of $161.1 billion in 2018-19 with a deficit of $7.4 billion, to total spending of $165.7 billion in 2019-20 and a deficit of $9.2 billion, there has been a large provincial fiscal cost.  Ontario’s nominal GDP was expected to be $909 billion in 2020-21 but is now expected to be $844 billion.

Here is an interesting way to look at the cost to date of this pandemic in Ontario.  For the period 2019-20 to 2020-21, GDP is projected to be lower by $65 billion dollars while government spending will be up.  Total spending is up $30 billion - from $156.7 billion to $186.7 billion.  So, one measure of the direct fiscal and economic cost in Ontario of the pandemic to date given the anticipated loss in GDP and the projected spending increase is to combine the two for a total of $95 billion.  If you take Ontario’s population in 2020-21 (14.831 million) and divide, the per capita cost in Ontario this year is expected to be $6,406. 

While that sounds like a lot – and it is - there is another way to look at the numbers.  With total cases at 40,459, the cost per case to date in terms of additional spending and output loss is $2,348,056.  And if you want a quick back of the envelope calculation of the value of a life – yes, economists (and governments) do that too – then given the number of deaths to date at 2,788 – we get a cost of $34,074,605.  A per capita cost of $6,496 dollars, a per case cost of $2.3 million and a per life lost cost of $34.1 million – anyway you look at it, this has been expensive.