OTTAWA – The Conference Board of Canada has released its latest forecast of provincial economic activity and finds a broad-based recovery taking place aided by the rollout of COVID-19 vaccines and a rebound in energy, tourism, and exports.
The Conference Board expects every province to record a sharp rebound in real gross domestic product (GDP) growth this year as the rollout of vaccines leads to the removal of provincial restrictions on economic activity and travel. The recovery will receive a boost from pent-up demand and the fact that millions of Canadians who managed to keep their jobs have accumulated a sizable amount of savings.
“The news of successful vaccines against COVID-19 has provided optimism about ending the health crisis and lifting battered economies all around the world out of the deepest recession in modern times,” says Pedro Antunes, Chief Economist at The Conference Board of Canada. “Our view is that consumers will lead the recovery over the second half of 2021 as COVID-19 cases dissipate and economic prospects and consumer confidence improves.”
Unable to travel, Canadian households have saved up or redirected the roughly $50 billion in spending that occurs abroad each year. Aggregate household savings swelled from $18 billion in 2019, to our estimate of over $200 billion in 2020. Even with a rebound in spending, household balance sheets will remain in great shape in 2021, averaging $113 billion, roughly five times what households held in savings in the four years prior to the pandemic.
Additionally, The Conference Board of Canada expects world oil prices and other commodity prices to continue to recover over the near term, providing a much-needed boost to resource sector investment.
Federal stimulus measures are estimated to have been more than $280 billion in 2020, or the equivalent of 12 per cent of GDP. Once the crisis is past, the government will likely rein in spending to keep the deficit under control. As a result, growth in federal government consumption is expected to slow to two per cent growth in 2021 and then average annual growth of essentially zero between 2022 and 2025.
While Canada’s economy has recovered from the shutdowns imposed in March and April of last year, it remains a long way from normal. Employment remains 4.4 per cent below pre-COVID levels, still reflective of a very deep recession. Many industries will not be able to fully recover until well into 2021, notably retail, culture and recreation, food and beverage services and anything tourism related. And the impact of COVID-19 on the global economy has decimated Canadian exports, especially for oil and natural gas.
The outlook for provinces across Canada this year is as follows:
Newfoundland: After falling by an estimated 3.5 per cent in 2020, Newfoundland and Labrador’s real GDP is forecast to grow by 2.8 per cent in 2021 and 4.7 per cent in 2022, as the province continues to recover from the impacts of Covid-19.
P.E.I: Prince Edward Island’s economy is currently undergoing one of the largest negative shocks in its history. The worst should be behind the Island province, however. After falling 4.3 per cent in 2020, P.E.I.’s economy should make a full recovery, growing 4.9 per cent in 2021 and 5.0 per cent in 2022.
Nova Scotia: Nova Scotia’s economic recovery will pick up its pace this year on the back of looser restrictions and a fast rebound in the labour market. We expect that the economic reopening early in the year will support a fast rebound of in Nova Scotia’s economic activity, especially on the services-producing side. Nova Scotia’s real GDP is expected to rebound by 4.1 per cent in 2021, after shrinking by 4.0 per cent in 2020.
New Brunswick: New Brunswick has been relatively successful at controlling the spread of COVID-19 and the avoidance of some of the shutdown measures implemented in central Canada enabled a shallower recession last year compared with most other provinces. Real GDP dropped by 4.1 per cent in 2020 and a solid gain of 3.4 per cent is anticipated this year.
Quebec: The resurgence of COVID-19 toward the end of 2020 has had a significant effect on the province of Quebec. A deceleration in GDP growth in the final quarter of 2020 will give way to a contraction of 1.1 per cent in the first quarter of 2021. As several consumer-facing industries remain unable to make any significant progress, the potential for a full recovery of output continues to hinge on the speed at which the province can safely reopen. Taken together, we forecast the economy to grow by 4.5 per cent in 2021 and 3.9 per cent in 2022.
Ontario: Ontario’s economy has had more difficulties in dealing with COVID-19 compared with other regions of the country mainly because of a slower re-opening in the spring and the fact that Toronto has faced at least some restrictions for much of the year. Housing was one of the few sectors of the Ontario economy to expand during the pandemic due to rock bottom interest rates. The latest provincial budget indicated that the government plans to boost infrastructure spending through 2023. In all, we expect real GDP to expand by 4.5 per cent this year in the wake of a 5.5 per cent drop in 2020.
Manitoba: The province was successful at controlling the spread of COVID-19 last spring and summer, but this situation changed sharply last autumn as a surge in infections forced the provincial government to move into the “red zone.” We expect the economy shrank by 4.0 per cent in 2020 but will grow by 4.3 per cent in 2021.
Saskatchewan: The Saskatchewan economy declined 5.2 per cent in 2020 as the province suffered a steeper recession than many due to the combined effects of closures and low resource prices. But a recovery of 5.4 per cent is expected this year, with an additional 2.4 per cent gain forecast for 2022.
Alberta: The rollout of vaccines, which could see large swaths of the population vaccinated by mid-year, a positive outlook for oil and natural gas prices, and healthy household finances are behind our view that Alberta’s economy and labour market will strengthen over 2021. Alberta will experience the largest increase in real GDP in 2021 as the 8.0 per cent plunge in economy activity last year will set the stage for a rebound of 6.4 per cent this year.
British Columbia: Last year, B.C. recorded a drop in real GDP of 4.7 per cent, but better days are ahead as we expect the economy to rebound and expand by 4.9 per cent this year. Labour markets have managed to recover a larger share of the jobs lost during the height of the pandemic last April and May compared with the rest of the country. This trend continued in January of this year as the province recorded a slight increase in jobs compared with large declines in central Canada.
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