Canada’s two-track economy and the path to recovery: Statement on today’s GDP numbers by the Canadian Chamber

(OTTAWA) – March 2, 2021 – The Canadian Chamber of Commerce’s Chief Economist, Trevin Stratton, issued the following statement regarding today’s GDP numbers.

“Today’s GDP numbers confirm what most of us already knew: that 2020 was a historically grim year for the Canadian economy. While Canada’s 5.4% contraction is the steepest annual decline on record, today’s numbers also tell a tale of a diverging, two-track economy. Today’s number are promising on the whole, but show a challenging situation for those businesses stuck on the southbound track.

While goods-producing industries saw growth at the end of last year, the services-producing industry edged down once again in December. Many businesses in the hardest hit sectors, such as accommodation, food services, retail, travel and tourism, are still struggling as they rely on physical presence. The uneven economic impact on these businesses has been more pronounced in Canada due to the trade-off between restrictions and economic activity for these sectors.

There are likely brighter days ahead as pent-up demand, household savings, and consumption are released and our economy reopens as Canada achieves widespread vaccination this year. This pent-up demand will hopefully benefit the hardest hit sectors the most as they have experienced the steepest decline in demand. In the medium term, however, the hardest hit businesses will enter the recovery period suffering under a debt load that is fast becoming unsustainable and will have to be repaid if there is no further debt relief. Due to their debt loads, these small businesses will also be the most vulnerable to any increases in interest rates as our economy recovers. Targeted support for these companies should be an integral piece of any economic recovery plan.

While the public sector continues to grow, housing investment continues to rise and consumption is expected to rebound, business investment slackened and is not projected to fully recover until the end of next year according to the Bank of Canada. Many businesses on the northbound track will be looking to invest and governments should be exploring unlocking this private capital to manage historically high debt and deficits and mitigate upside risks. Canada’s investment environment was falling behind our competitors well before the pandemic and, if we want to attract and retain capital in Canada, the business community will need policy measures that encourage investment, job creation and productivity growth in the federal budget.

As the business community looks forward, it is crystal clear Canada’s economic recovery will be business-led. The quickest and most cost-effective path to economic recovery is through the job creation and investments from businesses on Main Streets across the country.”

About the Canadian Chamber of Commerce – Because Business Matters

The Canadian Chamber of Commerce helps build the businesses that support our families, our communities and our country. We do this by influencing government policy, by providing essential business services and by connecting businesses to information they can use, to opportunities for growth and to a network of local chambers, businesses, decision-makers and peers from across the country, in every sector of the economy and at all levels of government, as well as internationally. We are unapologetic in our support for business and the vital role it plays in building and sustaining our great nation.

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For more information, please contact:

Phil Taylor
ptaylor@chamber.ca