Canadian Outlook

Updated: October 25, 2021  |  Français

Canada’s Road to Recovery: Traffic Easing, but Speed Bumps Ahead

The Canadian economy contracted by 0.3 per cent in the second quarter, due largely to a sharp 4.0 per cent downturn in real exports. The downshift has forced us to chop our forecast for real GDP growth in 2021 to 5.1 per cent.

Quarterly growth will fall back to near 4.5 per cent at annual rates through to the middle of next year as the economy picks up the remaining slack left by the recession. Prospects after that, however, are considerably dimmer as the economy comes to grips with high mortgage debt and the end of government income supports.

Contents of the Autumn 2021 edition:

  • Global and U.S. outlooks
  • Canada’s Business sector
  • Housing sector
  • Housing Markets Set to Cool
  • All Eyes on Fiscal Policy
  • Prices to Stabilize and Bank of Canada Still on Track to Increase Interest Rates in Late 2022

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Key findings

As labour markets come back to pre-pandemic strength, slow growth in the size of the working-age population will hamper economic potential after 2023, even with full employment.

Canada’s economy has started to grow again after sputtering in the spring. Output growth is forecast at 5.1 per cent for 2021 and 4.4 per cent for 2022. High levels of consumer savings and government stimulus are still powering through the system but will soon begin to ease. Toward the end of next year, economic growth is expected to cool considerably.

In Canada and elsewhere, widespread production delays and cost increases have led to higher inflation. Impacts are temporary, but it will take another year before consumer price increases fall back to the Bank of Canada’s 2.0 per cent target.

Easing government stimulus measures will help reduce federal and provincial deficits, but the debt overhang a remains a long-term issue. Shorter term, our forecast reflects the September 20 election outcome, with no significant change to the direction of policy already signalled by the Liberal government. Minority governments, however, tend to add uncertainty to future program and spending plans.

Issue briefings

Canada’s two-year outlooks

Business investment

Curves Ahead

14-min read  |  October 18, 2021

Energy

Balanced Optimism for Oil and Gas

8-min read  |  October 20, 2021

Financial markets

Stability Ahead

13-min read  |  October 25, 2021

Government

All Eyes on Fiscal Policy

8-min read |  October 13, 2021

Household consumption

Services Spending to Kick-Start Recovery in Consumption

8-min read | October 21, 2021

Household income and employment

Spurred by Reopening, Jobs Return

8-min read | October 21, 2021

Housing

Housing Markets Moderating

8-min read | October 21, 2021

International trade

Trade Recovery Loses Momentum

8-min read | October 21, 2021

Industry trends

Solid Fundamentals Will Boost Canada’s Industries

8-min read | October 20, 2021


Previous release

Booming Economy Not Without Its Risks

Impact paper  |  24-min read
July 6, 2021

Previous two-year Canadian outlooks

Business investment

Recovery to Pick Up Steam Later This Year

13-min read  |  July 21, 2021

Energy

An Optimistic Outlook for Oil and Gas

13-min read  |  August 4, 2021

Financial markets

Bank of Canada Remains Cautious Despite Accelerating Growth

13-min read  |  July 27, 2021

Government

Budget 2021 Brings More Support

13-min read  |  July 22, 2021

Household consumption

Shopping Frenzy to Resume After Economic Reopening

13-min read  |  August 10, 2021

Household income and employment

Hurdles Remain as the Recovery Finally Rounds the Corner

13-min read  |  August 4, 2021

Housing

Residential Markets Hot … Maybe Too Hot

13-min read  |  August 4, 2021

International trade

Recovery Hits a Few Speed Bumps

13-min read  |  July 27, 2021

Industry trends

Industry Prospects Looking More Upbeat

13-min read  |  August 9, 2021