Recovery Rests on Vaccine Rollout: Canada’s Two-Year Outlook—January 2021

• Canada’s economy rebounded through the summer, but rising COVID-19 cases—both at home and south of the border—will slow the pace of recovery. Many businesses in Canada face dim prospects over the first half of 2021.
• A successful rollout of vaccines will encourage households to spend some of what they’ve amassed in savings. Household balance sheets are in great shape thanks to government support and travel bans that have cut spending on foreign travel to almost nothing.
• The federal and provincial governments are pledging continued support to businesses and households. The pandemic will drive up public debt to record levels, putting a strain on government finances and public spending once the crisis is past.
• Real GDP is forecast to post growth of 5.3 per cent in 2021 and 3.5 per cent in 2022. This follows the deepest recession in modern times. We estimate that economic activity dropped by 5.3 per cent in 2020.

Appendix A—Methodology