Economic predictions of the ultimate extent of the decline in Gross Domestic Product (GDP) we can expect to see in Canada this year continue to vary. Recent projections by the Organization for Economic Cooperation and Development (OECD) see Canada's GDP dropping by roughly 10% this year, when all is said and done. This is a truly incredible decline, the likes of which most investors have not seen in their lifetimes.
This GDP decline is important for individual investors to consider in relation to their personal finances for a few reasons. GDP growth (or decline) is an input government rely on for making taxation policy. Declining GDP could increase the need for direct or indirect taxation to cover a significant shortfall. This means saving up tax losses and or taking capital gains now, may be a good idea.
Getting a second job or having another source of income in addition to one’s day job may also be beneficial in this environment. Projections of GDP decline of this magnitude implies significantly higher unemployment than what already exists.
The OECD economists are very intelligent and generally know what they're doing. So no matter how bullish one may be on a quick recovery out of this pandemic, the data is certainly pointing in another direction.
Staying cautious in the stock market, saving up a rainy-day fund, and getting another source of income are there are three great ways Canadians can shore up their personal finances during this time of instability.
Invest wisely, my friends.
