OTTAWA: Canada’s economy will likely take about two years to recover from the coronavirus pandemic’s thrashing and regain lost jobs, parliament’s budget watchdog said Tuesday.
But the country’s oil sector—a major contributor to Canada’s GDP—will suffer lasting effects from the recent oil price shock, parliamentary budget officer Yves Giroux said in a report, reports AFP.In the second quarter the economy suffered its “sharpest decline” on record since the onset of the pandemic, contracting 11.5 percent while Canada’s jobless rate peaked at 13 percent in May.
By the third quarter, Giroux estimates the country will have recouped about two-thirds of the decline in economic activity.
But thereafter growth “will slow considerably from its recent pace,” he said, taking another 12-18 months to reach pre-crisis levels (by early 2022).
The unemployment rate, meanwhile, won’t hit the pre-crisis level of 5.7 percent until mid-2023, he predicted.
The forecast does not include new aid measures introduced in the past week, which Giroux said could actually “help to accelerate the economy’s recuperation.”
He noted in the report that 5.5 million workers were laid off, were furloughed or worked fewer hours than usual during March and April.As of mid-August, roughly 3.7 million workers had been rehired or returned to usual working hours.
Prime Minister Justin Trudeau last week pledged to create one million new jobs during the recovery.
Oil prices, after a record collapse in April and a modest clawback since then, are expected to remain relatively flat over the coming years.
West Texas Intermediate (WTI) fell from US$60 per barrel in December 2019 to US$17 in April but has since recovered to US$41, as of September 18. During the same period the price of Western Canada Select (WCS) dropped to US$7 per barrel and has recovered to US$31.
Based on recent futures prices, Giroux projected WTI oil prices to climb to US$44 per barrel and WCS to hit US$33 by the end of 2024 -- below previous estimates.
All of this will have a dramatic impact on government finances.