As elsewhere, the Covid-19 pandemic has led to a dramatic recession in Canada. As elsewhere, travel, tourism, hospitality, entertainment and many other sectors of the economy were hard hit. In addition, Canada is an important producer of oil and was hit by the sharp drop in oil prices. In the first quarter of 2020, the Canadian economy dropped at an annualized rate of 8,2 percent. Since forecasts or scenarios are of course associated with very high levels of uncertainty at the moment, I do not publish a detailed economic forecast. As in other countries, the economic recovery has started in May and will continue during this summer. In May, the number of new infections slowed, some businesses reopened, and a slight improvement on the labor market. But for the second quarter of 2020 (starting in April), one should still expect a dramatic economic contraction of more than 30 percent (annualized). And for the whole year of 2020, I think that there will be a severe contraction of the economy of around 9 percent. This will be followed by a rebound of around 5 percent in 2021. In particular, fiscal and monetary policy measures will support the economy. In a more dramatic scenario (for instance, if there is a second wave of the pandemic), the contraction in 2020 would be at around 12 percent. As I mentioned above, such forecasts are obviously associated with a high degree of uncertainty. In particular, there is the risk of a second wave of the pandemic. At the global scale, worldwide tensions could increase – especially between the United States and China.
While I use several models in my forecasts, my published numbers are also strongly influenced by my personal experience and judgment. One may say that my forecasts are produced by interactions between me and the machine.
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