Forecast: Economic recovery in 2021

The world’s economy took one of its biggest hits last year as the COVID-19 pandemic and associated lockdowns swept the globe.

There’s broad consensus among banks and think-tanks that 2021 will be a year of renewed growth and the beginning of the recovery from the pandemic. But how much the economy recovers this year will depend on vaccine rollout.

The Bank of Canada noted a few positives in its fall update to Parliament. While the Canadian economy contracted by about 5.5 per cent in 2020, growth is expected to hit four per cent in 2021 and continue through next year. The bank also noted that its initial, somewhat pessimistic view of Canada’s recovery was based on the assumption that vaccines wouldn’t be widely available until mid-2022. Canada’s vaccine rollout moved more quickly than expected, although it’s certainly had some hiccups, and the current plan is to have everyone vaccinated by the end of 2021.

There were other positive signs noted by Toronto Dominion Bank, including that by November Canada had regained 80 per cent of the jobs lost in March and April.

But the vaccine schedule will be critical, said the Business Development Bank of Canada (BDC). Widespread vaccine distribution by summer could mean as much as an extra half per cent in economic growth; later rollout will limit total growth to about four per cent for the year, not quite enough to make up the losses from 2020.

While Canada is an export-market and the international economic recovery is hard to predict, the tools other governments are using to ease the pain are good for Canadian exports, the business development bank noted. Namely, low interest rates and a somewhat more predictable geopolitical environment should be good news for Canada.