Vancouver Sun

Re­bound fore­casts de­pend on vac­cine roll­out: econ­o­mists

- TARA DESCHAMPS Unemployment · Finance · Canada News · Vaccines · Banking · World Finances · Employment · Society · Business · Medical Treatments · Bank of Montreal · Quebec · United Kingdom · South Africa · Africa · Chrystia Freeland · Bank of Canada · Doug Porter · Canadian Imperial Bank · Royal Bank of Canada

Chief econ­o­mists from Canada's big banks ex­pect the econ­omy to re­bound this year, but say fail­ing to con­trol COVID-19 or get vac­cines into arms could up­end that re­cov­ery.

Speak­ing at an an­nual break­fast hosted vir­tu­ally by the Eco­nomic Club of Canada on Thurs­day, econ­o­mists ex­pressed cau­tious op­ti­mism about the months ahead.

“We be­lieve that vir­tu­ally ev­ery econ­omy will see a sub­stan­tial im­prove­ment over the next year,” said Doug Porter, chief econ­o­mist at BMO Fi­nan­cial Group.

His bank is ex­pect­ing the global econ­omy to post a 5.5-per-cent re­bound this year, fol­lowed by a four-per-cent growth rate next year. But let­ting COVID-19 re­main un­ruly can threaten all that, he said.

If the virus con­tin­ues to ac­cel­er­ate, re­stric­tions, in­clud­ing Que­bec's new overnight cur­fews, will likely be ex­panded and wreak havoc, he warned.

“The risk is that these re­stric­tions last even longer and do lead to an out­right de­cline in ac­tiv­ity in a num­ber of ma­jor economies in the first quar­ter,” Porter said.

There may also be risks for eco­nomic progress if mu­ta­tions of the virus de­tected in the U.K. or South Africa spread widely in Canada or the coun­try con­tin­ues with its “dis­ap­point­ing slow” roll­out of COVID-19 vac­cines, he said.

Vac­cines were also on the mind of Avery Shen­feld, chief econ­o­mist at CIBC. Late last year, he said Fi­nance Min­is­ter Chrys­tia Free­land asked banks and econ­o­mists how to un­leash the sav­ings Cana­di­ans are sit­ting on and stim­u­late spend­ing again. The an­swer, said Shen­feld, is “hit me with your best shot.”

“Give us the vac­cine and get out of the way be­cause peo­ple are dying to go to restau­rants again, but they're just not will­ing to die to go to a restau­rant,” he said. “Once peo­ple have their vac­cine I think that we're go­ing to see a huge un­leash­ing of pent-up de­mand for the­atre tick­ets, even Rap­tors tick­ets, al­though they don't look so good this year.”

As vac­ci­na­tions reach por­tions of the pop­u­la­tion that are less vul­ner­a­ble to the virus, Shen­feld said the coun­try will see money spent in a hurry on most of the things that Cana­di­ans have been pre­vented from do­ing over the last year.

How­ever, cash won't necessaril­y be flow­ing for every­one.

Craig Wright be­lieves labour force sur­vey re­sults, which mea­sure em­ploy­ment lev­els na­tion­wide, sched­uled to be re­leased Fri­day will show un­em­ploy­ment creep­ing slowly higher. The chief econ­o­mist at Royal Bank of Canada is pre­dict­ing the un­em­ploy­ment rate will edge up to 8.7 per cent from the 8.5 per cent re­ported in De­cem­ber.

Wright is pay­ing par­tic­u­lar at­ten­tion to four ar­eas of the labour mar­ket: work from home, the shape of the re­cov­ery, long-term

em­ploy­ment and COVID-19's im­pact on women in the work­force.

About 2.5 mil­lion Cana­di­ans who pre­vi­ously did not work from home are do­ing so dur­ing the pan­demic and about 80 per cent want a hy­brid model where they can work at home and from an of­fice af­ter COVID-19 has sub­sided, he said.

How­ever, busi­ness sur­veys Wright has seen sug­gest that only 30 per cent of com­pa­nies that en­able work from home are think­ing of of­fer­ing that op­tion.

“There is go­ing to be a tug of war

go­ing on and a hy­brid model is the most likely out­come as we go for­ward,” Wright said.

Mean­while, he said the coun­try is ex­pe­ri­enc­ing a huge jump in long-term un­em­ploy­ment. Un­em­ploy­ment is con­sid­ered long-term when it reaches 27 con­sec­u­tive weeks or longer.

Fe­male par­tic­i­pa­tion in the labour force has “fallen off” quite sharply and it's gone from a three-decade high to lev­els we saw 30 years ago, he pointed out.

 ?? PETER J. THOMP­SON FILES ?? Top econ­o­mists are cau­tiously op­ti­mistic that Canada's econ­omy will re­cover from the pan­demic this year.
PETER J. THOMP­SON FILES Top econ­o­mists are cau­tiously op­ti­mistic that Canada's econ­omy will re­cover from the pan­demic this year.

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