Following the biggest economic downturn since 1945 (a drop of 5.5 percent of GDP, according to the recent estimates), the economy should rebound sufficiently to balance the losses of 2020. The Canadian economy will benefit from increased spending and a resurgence in exports. The economic forecast for Canada in 2021 is comparable to that of other developed countries now.
Advancing government investment initiatives should also help to boost Canadian economic growth. On the other hand, a delay in company investments and a downturn in the housing market will constrain the recovery’s scope. Without a doubt, the sustainability of the economic recovery will be determined mostly by the pandemic’s progress.
Medical advancements in recent years have been encouraging; beginning in the summer of 2021, widespread distribution of vaccination might help the Canadian economy grow by 4.5 percent or more. Gains would be limited to 4% if deployed later. In any case, resuming pre-pandemic levels of activity will have to wait until 2022.
Apart from the virus, worldwide volatility is still high, and protectionism attitudes continue to cloud the outlook for an export-oriented economy. The Bank of Canada will keep its extraordinary monetary stimulus policy in place until at least 2023. The rescue efforts of the Canadian government have contributed to a significantly stronger labor market recovery than the situation in the United States.
As of October, 80 percent of the 3 million jobs lost in March and April in Canada had been recovered. Following the lifting of the spring lockout, consumption and the housing market rebounded fast, much as they had in the United States.
Goods exports (including energy) have recovered swiftly, but service exports have not recovered at all. Looking forward to 2021, it seems Canada should enjoy a favorable export climate, with consumption bolstered by a strong labor market and an ongoing government assistance program. Due to the necessity of getting their finances in order, studies of entrepreneurs reveal that enterprises will likely postpone or cancel investments.
Certain service industries, particularly those that rely on tourism, such as lodging and food services, will have another difficult year. During the first quarter, the pandemic is predicted to hamper their activities until largely rebounding once spring arrives. Their prospects for the end of the year will be determined by the distribution of an efficient vaccination.
The real estate sector, which has remained largely unaffected by the crisis, is anticipated to remain stagnant at best. In the medium term, a large drop in immigration, as well as the possibility of tighter mortgage lending rules, provide downside risks, particularly in metropolitan areas. Economic growth is predicted to be greater in general in provinces that were severely hit by Covid-19’s economic consequences in 2020.
In 2021, Ontario, which had the most stringent health restrictions in 2020, might have the strongest economic growth in the country. The province’s industrial sector is expected to benefit from new investment in the car manufacturing sector.
The economy, particularly in the Greater Toronto Area, should benefit from an increase in immigration. Ontario is predicted to grow at a rate of 4.5 percent. British Columbia and Quebec, not far behind, are forecast to have high growth rates of around 4%.
These provinces will face headwinds from a cooling property market in British Columbia and a slowdown in the aerospace sector in Quebec. Alberta was hit incredibly hard by the lockdown and its influence on oil prices in 2020 in the Prairies. On all fronts, the province will gain from stronger pandemic control.
Given the low amount of investment forecast in the oil sector, growth will be below average (3.5 percent). Saskatchewan, whose resource mix was significantly less affected by Covid-19, is expected to expand by 4%. Manitoba, which had the greatest year of the group in 2020, will grow at a rate slightly lower than the national average of 3.5 percent. The scenario in the Atlantic provinces will be determined by the pandemic’s overall control in Canada.
During the summer of 2020, incoming tourism to the region was limited due to the development of a bubble banning movement inside the four Atlantic provinces. It did, however, enable the region to maintain Canada’s finest health record. If the current trend continues, the economic outlook for 2021 will be limited to a range of 2.0 percent to 2.5 percent. The removal of these restrictions could result in a one-percentage-point increase.
Strong growth in remote employment, e-learning, telemedicine, and e-commerce in 2020 pushed technology adoption across the economy. As a result, between February and April 2020, output in the technology sector declined by only 3%, compared to a significant drop of 18% in the economy. In 2021, about 40% of Canadian SMEs expect to invest in technology, which should assist the industry. The technology sector is expected to rise by 1.1 percent in 2020 and 2.2 percent in 2021.
For the most part, the crisis appears to be a regular downturn. Production levels are predicted to gradually increase up to pre-pandemic levels by 2022, after being affected hard at the start of the crisis. The tourist, lodging, and food service sectors, on the other hand, are expected to rebound more slowly. These hard-hit industries will almost certainly have to wait until the pandemic is almost entirely under grip before they can resume normal operations.
The oil industry in Canada has had a difficult year. Many big producers have been obliged to agree to large output cuts as a result of the historic drop in oil demand. Nonetheless, the International Energy Agency predicts oil prices to rise to levels similar to those seen in 2019, representing a 20% increase over the low point in spring 2020. However, in the medium run, this may not be enough to entice additional investment.
Finally, handling the pandemic will be the most important factor in the Canadian economy’s growth. If vaccine distribution begins in the middle of the year, we could witness 4.5 percent or more economic growth and recovery to pre-crisis GDP as early as 2022. The growth rate will get constrained to around 4% if vaccination disrupts, and the Canadian economy will not fully recover until late 2022.