Pandemic’s Lingering Effects Will Haunt Canada’s Long-Term Prospects: Canada’s Outlook to 2040—June 2021

The Conference Board of Canada, 18 pages, June 15, 2021
Issue briefing
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This annual economic forecast presents the highlights of the long-term national outlook.

Document Highlights

  • The Canadian economy will rebound by 5.8 per cent this year and 4.0 per cent in 2022 thanks to the ongoing rollout of vaccines and improving labour markets. This forecast is somewhat better than our December 2020 outlook.
  • Our long-term outlook envisions modest economic growth, with immigration and better productivity gains helping to counter the impact of the last wave of retiring baby boomers on labour force growth.
  • Inflation will rise over the near term but return to the 2.0 per cent range and remain at this level through the long term. This will enable the Bank of Canada to keep interest rates at historically low levels through 2040.
  • Fiscal deficits will persist over the long term, as the federal government will find it challenging to contain spending due to rising health care expenditures and demands from the provinces and cities for funding.
  • Investment in Canada’s energy patch will be weak over the long term because of the winding down of existing projects, a lack of new projects, and ongoing difficulties in delivering energy to foreign markets.
  • The pandemic has added to the trend toward deglobalization, which emerged during the Trump administration and could persist over the long term to the detriment of Canada’s exporters.

Table of Contents

  • Key findings
  • Economy facing long-term challenges
  • Demographics pose problems for Canada’s economy
  • Potential output hurt by weak labour force growth
  • Will ultra-loose monetary policy lead to inflation
  • Lower deficits but few fiscal surpluses over the long term
  • Aggregate demand growth to slow
  • Methodology

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