The Conference Board of Canada forecasts economic growth in 2021 and 2022 — but connects the strength of recovery with the distribution of vaccines.
The two-year economic outlook released by the Conference Board of Canada forecasts that gross domestic product (GDP) will grow 5.3 per cent in 2021 and 3.5 per cent in 2022 respectively.
Growth forecasts for the next two years follow an estimated economic contraction of 5.3 per cent in 2020, one of the deepest recessions in modern times.
Going forward, the board states that the strength of Canada’s economic recovery will largely depend on the successful distribution of vaccines against COVID-19.
“The news that safe and effective vaccines against COVID-19 have begun to be distributed has provided optimism that the pandemic could soon be beaten,” says Pedro Antunes, chief economist at The Conference Board of Canada.
“A successful roll-out of vaccines will encourage Canadian households to spend some of what they’ve amassed in savings over the past year, which will help bolster the economy.”
Household finances in Canada are generally considered to be in great shape, thanks to government support and travel bans that have cut spending on foreign travel to almost nothing.
Aggregate household savings swelled from $18 billion in 2019 to over $200 billion in 2020.
But Canada’s economy remains a long way from normal. Employment in November was three per cent below where it was in February, before the pandemic struck. That weakness reflects a deep recession.
Many Canadian industries will not fully recover until the second half of 2021, when the health risks associated with COVID-19 will have dissipated, borders re-opened and households and businesses can get back to normal.
“Activities that require in-person transactions continue to be the hardest hit,” says Antunes. “This includes brick and mortar retailers, personal services, culture and recreation, food and beverage services, and anything related to tourism. It will be a long road to recovery.”
Federal and provincial governments continue to provide financial support to businesses and households, and that will drive up public debt to record levels, putting a strain on government finances and public spending once the crisis is over.
The Conference Board of Canada expects vaccines will bolster business confidence, investment, and trade, especially as borders reopen over the second half of 2021.
As such, economic activity in Canada is forecast to pick-up on its own without the need for the additional fiscal stimulus.