THE Conference Board of Canada on Tuesday released its Canadian Outlook Executive Summary – Spring 2020. In the fourth quarter of 2019, Canadian economic growth was already on precarious footing. The added shock of COVID-19, the rail blockades and a collapse in oil prices is putting the country on the brink of recession.
As the economy is hit by the slew of additional shocks, the CBC expects business investment and exports to post substantial declines and consumer spending to ease. As a result, economic growth will contract by a projected 2.7 per cent in the second quarter. Overall, the CBC expects growth of just 0.3 per cent in 2020 followed by a rebound to 2.5 per cent growth in 2021.
“Despite the fact that the global economy is currently shaken at its core, we expect to see growth resume in the third quarter, meaning that the economy will avoid a technical recession,” said Matthew Stewart, Director Economic Forecasting at the Conference Board of Canada. “However, due to the unpredictability of the coronavirus, there are still huge downside risks to the outlook.”
The Canadian Outlook Executive Summary examines the short-term economic outlook for Canada—all major components including consumer expenditures, housing, government, nonenergy business investment and trade. The outlook for the financial, labour and energy markets is also given along with costs and prices.
- The Canadian economy is reeling as the impacts of the COVID-19 pandemic ravage consumer and business spending and cratering oil prices have put a halt to the expected rebound in the energy sector.
- The economy came to a near-halt at the end of last year. Growth has not been much better in the first quarter and is set to contract in the second. Overall, we expect real GDP to expand by just 0.3 per cent this year before bouncing back with 2.5 per cent growth next year.
- Exports and non-residential business investment are expected to fall this year.
- The Bank of Canada has responded to the deteriorating economic outlook in an unprecedented way. In a period of just over one week, the Bank slashed its overnight rate by 100 basis points.
- Lower interest rates will throw more fuel onto the fire that is Canada’s housing market, leading to a strong increase in resale home prices and residential investment this year.
- Encouragingly, given the historically tight labour markets and the short-term nature of the economic shocks, businesses are expected to retain workers as much as they can, and employment should recover along with the economy.