Canadian Long-Term Outlook Summary Summer 2020

COVID-19 hurts badly now, but will not last forever.

Canada’s economy—like that of almost every other country around the globe—has been hammered by COVID-19. But while the pandemic’s impacts have been devastating, they should also be brief. Our long-term forecast remains driven by demographic and economic expectations that are generally unchanged. In general, once we get through the pandemic crisis, the country can look forward to moderate but steady growth over the long term.

Contents of the long-term Summer 2020 summary:

  • Canada faces both short- and long-term challenges
  • Potential output growth looks set to slow
  • Monetary policy to the rescue?
  • Pandemic challenges fiscal policy
  • World outlook bleak now, mixed later
Storm over wheat field; Woman on cellphone

Key findings

Fallout from COVID-19 will produce a 4.3 per cent GDP decline in 2020, but we expect a bounce-back to 6.1 per cent growth next year. GDP will advance by an annual average of 1.7 per cent between 2022 and 2040.

Employment will drop 2.7 per cent this year but rebound by 3.1 per cent in 2021. Annual job gains will average less than 1 per cent over the long term.

Business investment has been weak and will erode further after a post-COVID-19 rebound in 2021 and 2022.

Trade is another casualty of the pandemic. Exports will fall sharply this year and not regain pre-COVID-19 levels until 2023 due to soft global growth and ongoing trade tensions.

Economic malaise has prompted the Bank of Canada to cut interest rates to near zero. We expect muted inflation to keep rates low through the long term.

Consumption will fall 4.1 per cent this year but rise 5.9 per cent in 2021. Due to high levels of household debt, only tepid growth is in the cards over the long run.