Canada’s economy could be due for a recovery in the next two years.
According to a report Tuesday by the Conference Board of Canada, the country’s economy is expected to growd by 5.8 per cent in 2021 and another four per cent in 2022 thanks to progress on COVID-19 vaccine distribution.
“The rollout of vaccines, which got off to a sluggish start, has ramped up recently, and most Canadians should be fully vaccinated by this autumn,” says Pedro Antunes, chief economist at the Conference Board of Canada.
“This will lead to a reopening of the economy and, consequently, real GDP should accelerate at a rapid pace in the second half of this year.”
One of the key elements to this rebound is household spending.
Canadian households are expected to spend some of the savings they built up over the course of 2020. The savings rate surged from 1.4 per cent prior to the pandemic, to 14.8 per cent last year.
The massive increase in savings will release a surge of pent-up demand, leading to a gain of 3.5 per cent in real household spending in 2021 and 6.3 per cent in 2022.
The report also indicates that close to 80 per cent of jobs in Canada have been recovered since the recession in 2020 and the unemployment rate is down from double digits last summer, to 8.2 per cent in February. Those unemployment figures could dip to about seven per cent in the final quarter of 2021 and 6.4 per cent by 2022.
The organization is predicting just a 0.7 per cent GDP growth in the first quarter of 2021.
On the fiscal front, government spending needed to support the economy was a record-setting deficit of $219 billion in 2020.
As the government support dips, the fiscal deficit will drop to about $73 billion in 2021 but will remain in the red through the medium term.