Bank of Canada Governor Tiff Macklem speaks with reporters on Oct. 28, 2020. (Photo: CPAC video capture)
The Bank of Canada says it could be 2022 before the economy recovers what was lost during the COVID-19 pandemic.
The central bank released its updated outlook Wednesday as it once again held its key interest rate target at 0.25 per cent.
Governor Tiff Macklem said their economic outlook is based on several assumptions, including a vaccine widely available by mid-2022 and no further widespread lockdowns.
“But we can expect successive waves of the virus to require localized and targeted restrictions. The need for these restrictions will ebb and flow and gradually diminish over time,” said Macklem.
Macklem said the country’s economy bounced back stronger than anticipated in the third quarter as many businesses reopened.
But the central bank projects fourth-quarter growth will be “just barely positive” — weaker than previously expected — due to the resurgence in COVID-19 cases.
Macklem noted Canada is still more than 700,000 jobs below pre-pandemic levels. Peak job losses in the Great Recession a little over a decade ago were about 425,000, he said.
“For 2020 as a whole, we expect the economy will have shrunk by about 5.5 per cent. Looking into 2021 and 2022, we are projecting annual growth to average almost four per cent with household spending leading the way,” said Macklem, noting growth will likely be choppy.
Overall, global GDP is projected to contract by about four per cent in 2020 before growing by just over 4.5 per cent, on average, in 2021-22, according to the central bank.
Meanwhile, the most recent Consumer Price Index data from Statistics Canada showed inflation at 0.5 per cent in September, well below the bank’s target range.
Macklem said until two per cent inflation is “sustainably achieved,” which is not expected until 2023, the central bank’s benchmark interest rate target will remain low.
“Inflation is expected to stay below the one to three per cent target range until early next year. After that, inflation is projected to rise gradually but stay below two per cent throughout the projection period,” he said.
The full economic outlook can be viewed on the Bank of Canada’s website.
After a strong rebound over the summer, Canada’s #economy continues to recover but has a long and choppy road ahead. Check out our full economic outlook. #cdnecon https://t.co/iPLLLLBZ0k
— Bank of Canada (@bankofcanada) October 28, 2020
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