In this blog, Tembo will dig into the BOC’s latest major statement to the media and the public from mid July, to try to understand the Bank’s analysis of the macro-economic situation Canada finds itself in. What the Bank does in the coming months and years will be crucial to how our economy and society fares at this point of our history.
First and foremost, the BOC is very optimistic and confident of medium to long term economic recovery. The Bank sees the worst of COVID behind us. It cites the overall resilience of the economy and the high efficacy of vaccines as key pillars of stability and strength. Despite these positive forces, the BOC still expresses some uncertainty over how ‘smooth’ the recovery will be, the course of the virus, and how international economic, virus, and financial conditions change. They have no crystal ball, and they don’t pretend that they do. The BOC does point to strong U.S. economic growth and stimulus, along with oil prices recovering as key forces which will benefit Canada and uplift economic growth here.
The BOC sees consumption as being the key domestic driver of recovery: “Some of the sectors hit by lockdowns, including retail, restaurant, and other hard-to-distance sectors, are already seeing a rebound, while others, like business and international travel, may take longer to recover.” The BOC makes the important point that there’s still half a million jobs that must be regained for us to return to pre-COVID levels, but also says that many businesses have optimistic plans to return to full capacity soon. The expectation is that we’ll recover those jobs as people continue to engage economic sectors most hit by COVID (restaurants, retail, bars, services, etc.)
The BOC remains confident that the rest of this year and all of 2022 will see strong, consistent, and sustained economic growth. If the BOC is correct, GDP will go up 6% this year, 4.5% next year, and just over 3% in 2023 – marking a healthy period of recovery ahead. Let’s hope they’re correct, we continue with Part II.