You are currently viewing Posthaste: Look beyond the lockdowns — the Canadian economy is poised for a fulsome recovery

Posthaste: Look beyond the lockdowns — the Canadian economy is poised for a fulsome recovery

Dare we dream? Summer fun and fall holidays may be round the corner

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A number of provinces may be in the midst of stringent lockdowns at the moment, but there are signs that the Canadian economy is poised for a fulsome recovery.

On Friday, Dr. Theresa Tam, the country’s chief public health officer, also suggested a summer of outdoors fun and vacations in fall may lie ahead as she rolled out a blueprint for how the vaccination campaign could lift the country out of COVID-19 lockdown.

Just under 45 per cent of the Canadian population has received at least one dose of the vaccine, making it the 24th most vaccinated jurisdiction by population, according to Our World In Data.

The reopening would be greeted by a deficit-financed spending program to the tune of $143 billion over the next five years that’s expected to   boost Canada’s GDP by 1.3 per cent by the end of 2022, according to Tony Stillo, director of Canada economics at Oxford Economics.

The research firm raised its forecast for the Canadian economy to 6.8 per cent in 2021, up 0.6 percentage points from its previous estimate last month, and 3.4 per cent in 2022, 0.9 percentage higher than its April forecast.

“We see the direct effects of the country’s 2021 federal budget measures and indirect spill overs from U.S. President Joe Biden’s proposed American Jobs Plan boosting GDP growth in Canada by 0.6 percentage points to 6.8 per cent in 2021and by another 0.9 percentage points to 3.4 per cent in 2022,” Tony Stillo, director of Canada economics at Oxford Economics said in a report.

In addition, some of U.S. President Joe Biden’s US$2.7 trillion stimulus program would also wash up onto Canadian shores, boosting GDP by 0.2 per cent in 2022 and a cumulative 0.7 per cent in 2024.

“We think this new fiscal stimulus will eliminate slack in the economy and lead to a positive output gap that persists into the medium term,” Stillo noted in a report. The economist expects Bank of Canada to raise interest rates twice in 2023, to combat estimated inflation of 2.4 per cent a year from 2021 to 2025, well above the Bank of Canada’s interest rate target.

TD Bank also believes the fiscal stimulus outlined in the federal budget will boost the country’s real GDP by 0.3-0.6 percentage points this year and 0.4-1.0 percentage points next year, although the impact of the stimulus in 2022 is much less certain.

National Bank of Canada economists also point out that consumption levels are likely to firm up, especially as households are sitting on excessive savings that amount to 8 per cent of GDP in 2020.

The bank also raised its forecast for the Canadian economy to 6 per cent as a result.

“Our forecast for nominal growth is now 10.4 per cent, not seen in 40 years,” Matthieu Arseneau and Jocelyn Paquet, economists at National Bank, said.

Still, the growth spurt is not a given, according to Sri Thanabalasingam, senior economist, and Omar Abdelrahman, economist at at TD Bank.

“Beyond 2021, there is considerably more uncertainty around potential economic impacts. When will programs be initiated? Will there be hiccups in getting initiatives like national childcare off the ground? Could elections force a change in priorities?,” the TD economists wondered.

Let’s hope we are not getting ahead of ourselves, though.

A key test for a vaccinated jurisdiction may emerge from across the pond where the U.K. embarked on the third of its four-step reopening plan with further relaxation of outdoor activities today; full restrictions will be lifted by June 21. Until then, let’s stay put.

VACCINE SURGE: People wait for their COVID-19 vaccine inside the International Conference Centre during Peel Region’s “Doses After Dark” overnight COVID-19 vaccination clinic in Mississauga, Ontario, on May 15, 2021.
Canada is set to receive a large infusion of COVID-19 vaccines this week, even as questions swirl around how the immunization drive will be affected by the sudden departure of the man tasked with overseeing it.

The federal government says it expects around 4.5 million doses to arrive this week thanks to planned deliveries from Pfizer-BioNTech and Moderna.

The large influx comes as the Liberal government faces questions about who will now lead the vaccination campaign after Maj.-Gen. Dany Fortin was sidelined suddenly on Friday and reassigned from his role presiding over the national inoculation effort.

The Department of National Defence has said Fortin is under military investigation, but otherwise refused to provide any details. The government, meanwhile, has yet to name a replacement. Cole Burston/AFP

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The surging number of leases in Canada’s largest housing market paints a picture of a robust rental market, but it’s only half the picture since average rents have declined, say FP columnists Murtaza Haider and Stephen Moranis.

The latest rental housing data on the Greater Toronto Area (GTA) from various sources show that activity has far surpassed pre-pandemic levels, yet average rents are still lower than where they were a year ago.


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Source: Financial Post