The race between the virus and the vaccines

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Highlights

  • Global GDP is expected to expand by 5.6% in 2021 and 4.6% in 2022, following a -2.8% contraction in 2020, according to the Bank of Canada. Globally, vaccination programs are being rolled out about six months earlier than previously expected. It is assumed this will allow many advanced economies (except perhaps, Canada) and China to achieve broad COVID-19 immunity for their populations by the end of 2021. Other emerging economies would achieve this by mid-2022.
  • The U.S. economy is expected to recover faster than most other advanced economies and to return to full capacity by the end of 2021, roughly two years earlier than Canada.
  • Canada’s fiscal response in 2020 was easily the largest in the world. Nevertheless, Canadian GDP growth is expected to be only 4.0% in 2021 and 4.8% in 2022, after a large contraction of -5.5% in 2020. The tepid recovery (relative to other countries) means the economy will operate with considerable excess capacity, and inflation will not sustainably return to its 2% target, until sometime in 2023.
  • The provincial economy will grow by 4.5% in 2021, marginally outpacing Canada. A slightly stronger growth performance is expected in 2022.
  • Global trade has recovered; this backdrop is positive for B.C.’s merchandise exports which are trending higher and will help to underpin the recovery.
  • Provincial employment has almost returned to its pre-COVID level; the labour market recovery, however, is very uneven across sectors.
  • Air transportation and other tourism-dependent industries remain the epicentre of economic displacement. They will be slow to revive and will weigh on the recovery process.
  • Retail spending has rebounded and is on a healthy upward trajectory.
  • Construction will be a leading growth engine in 2021-22 as several large capital projects resume full-scale activity and governments spend more on infrastructure.