Omicron Variant Having Significant Impact on Canada’s Economic Recovery

OTTAWA, Jan. 19, 2022 (GLOBE NEWSWIRE) -- The Conference Board of Canada released its two-year economic outlook and forecasts that Canada’s real gross domestic product (GDP) will grow 3.9 per cent in 2022, down from 4.4 per cent forecast in our fall outlook, as the full effects of surging Omicron cases weigh on Canada’s economy.

“The pandemic’s most contagious wave yet is having a significant impact on Canada’s economic recovery,” said Pedro Antunes, Chief Economist, The Conference Board of Canada. “The economy should return to its potential output by the beginning of 2023 when population aging and anemic business investment will slow growth sharply.”

The Conference Board of Canada estimates that economic disruptions caused by high levels of inflation and supply chain issues will begin to ease in this year, driven in part by the normalization of trade flows and stronger actions by central banks, which will be stepping in with rate increases. We forecast that the Bank of Canada will implement its first interest rate increase in April 2022, followed by additional 25-basis-points increases in June and September. Both inflation and Omicron are key factors that could accelerate or moderate our assumed timeline of interest rate hikes.

Globally, the ongoing pandemic is having a similar impact as it is in Canada. The Conference Board of Canada is forecasting global GDP to expand 4.2 per cent in 2022 and 2.8 per cent in 2023. Supply chain challenges will continue through the first half of 2022 but are expected to slowly ease which will make it easier for firms to obtain the inputs required for production.

Looking south of the border, The Conference Board of Canada expects the United States along with China to drive global growth. Following solid rebounds last year, U.S. growth of 4.4 per cent is forecast for 2022, while the Chinese economy is expected to post growth of 5.1 per cent this year. Despite the strong economic growth in the United States, there have been some disappointments including sharply higher inflation due to a combination of supply-side and demand-side issues. However, each new wave of the virus has been less disruptive to the economy than the previous wave, and we expect that this will be true for Omicron as well. Consequently, we expect 2022 to be another good year for the economy.

The full forecast is available for subscribers, here. Media should contact [email protected] for access.

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