Canadian economic slowdown deepens
As Canadians begin to look forward to a post-pandemic future, many questions remain as to how the economy will look once the shutdown is over.
Prime Minister Justin Trudeau has previously said in his daily briefings he expects the Canadian economy to come “roaring back” after COVID-19 restrictions are lifted. But with the Canadian economy shrinking at an annualized rate of 8.2 per cent in the first quarter and the economy shedding almost two million jobs in April, is an outlook like this too rosy? Here’s what some economists have told BNN Bloomberg:
"The key question is how you're going to measure ‘roaring back.’ If you think about it in terms of economic growth numbers, I think we will probably see a very sharp increase in growth as part of the economy comes out of the lockdown... In the third quarter, we're expecting to see annualized growth of around 35 per cent, so the growth numbers are likely to be large. But that's also a reflection of how far the economy fell. If a company sells a hundred units and during the lockdown, they went down to something like 20 units and then when you reopen, sales go up to 40 units, you get a 100 per cent increase in sales, but the level of activity would be low and that's my point…
"I think it will take us a long time to fully recover from the economic contraction created by the lockdown and the oil shock. In terms of my forecast, I don't have the level of economic output returning to pre-COVID levels until mid-2022."
- Craig Alexander, partner and chief economist at Deloitte Canada
"It's my view and our team's view that it's probably going to take some time, years in fact, to get back above the level of GDP we were at at the end of 2019, and it's likely to take even longer than that for the unemployment rate to return to pre-pandemic levels.
"I think if there's a vaccine that is widely believed in and Canadians have widely received it, that's a potential catalyst that could help, but by no means does that resolve all the challenges that may be experienced as a result of this... I think ahead of that, it's going to be really hard to see if we're getting anywhere close to where we were pre-pandemic."
- David Doyle, North American economist and Canadian market strategist at Macquarie Group
"We expect economic activity will partially rebound over the second half of the year as restrictions are gradually eased. However, we assume some containment measures will remain in place until a vaccine or effective treatment is found, which will keep the economy operating below full capacity. Consumer caution related to both health and economic concerns, and lower business confidence, are also likely to limit the rebound in activity even as restrictions are lifted. And any permanent business closures will temporarily reduce the economy’s productive capacity. If restrictions are eased earlier or faster than we assume, and if done so safely, we should see a more robust recovery and less structural damage to the economy."
- Josh Nye, senior economist at RBC Economics
"We will get an initial spike in activity once we see the first step towards reduced social distancing. But a sustained surge will be dependent on having a vaccine or effective treatment. At that point, we would expect another big liftoff provided that we have avoided a lot of structural damage to the economy during this hibernation. We will need to keep enough of the business and household sector solvent to ensure that we are ready to go when the green light comes on."
- Avery Shenfeld, managing director and chief economist of CIBC Capital Markets
"We expect the Canadian economy to contract by 9.1 per cent year-over-year in 2020, but to return to growth in 2021 with a 6.5 per cent year-over-year expansion. Given the steep drop in economic activity this year, next year’s growth rebound comes on a low base and we don’t expect total economic activity to return to the levels we saw in Q4/19 until 2022. Our outlook is likely to be updated in the coming days."
- Brett House, vice-president and deputy chief economist at Scotiabank
"I personally think using the phrase 'roaring back' is maybe a bit of an overstatement. You can definitely see that people are doing as much as they can… but there are two big things standing in the way of completely getting back to normal. One is the concerns around health: Not everybody is going to feel comfortable getting out, spending, shopping, even going to work. The other factor is there's going to be some economic uncertainty: A lot of people have lost their jobs, even if it's just temporary. People have had their hours cut back, they're not sure their job is going to be there when they want to return. That will limit the rebound as well.
"We actually are one of the more optimistic forecasters out there. We believe that activity can rebound fairly strongly in the second half of the year, but even we don't see activity completely reversing the losses over the next year. We do think that there are certain sectors that will be heavily challenged, whether it’s travel, or entertainment or restaurants. Anywhere where a crowd gathers is going to be challenged, and I think we all know that it's going to be very tough for those sectors to come ‘roaring back.’ There are others that can return quickly. Things like construction, parts of manufacturing, parts of retail can come back very quickly, but overall we think it's a mixed picture."
- Douglas Porter, chief economist of BMO Capital Markets