Economic Analysis
Unless otherwise stated all references to Gross Domestic Product (GDP) or Productivity is based on year to quarter data. For reasons of continuity and comparisons with previous plots, the limits on the present graph has remained the same as before even though the economic decline exceeds those limits. The data source is Statistics Canada
Productivity
As it presently stands, the productivity numbers for most countries, including Canada, cannot be taken as any kind of meaningful reflection of a country's labor efficiency. It only reflects the highly efficient companies that remained in business throughout the pandemic.
Economy
The Canadian economy in 2020 was down by 5.4% for the year (-1.3% for the quarter) according to Statistics Canada or by C$113,583 million. In order to breakeven the Canadian economy will have to grow by about 7%. This will be very difficult to accomplish in less than two years. It may possibly take four or more years since the pace of growth from 2012 to 2019 was only 1.3%. A high of 3.0% occurred in 2017.
The Canadian economy is recovering though. By the end of the second quarter in 2020 the economy had already lost 16.7%. By the end of the third quarter the loss was down to 6.9%. It is now down to 5.4% for the year so it is possible that the economy will recover its losses at a faster than the historical rate. However, this assumes that all businesses will come back online and profit as in the past. Realisticly this is unlikely, since like the United States, many small businesses will never reopen or will no longer have as many customers as before. Many will need to pursue new markets for their products.
The Bank of Canada is bullish on a recovery and expects the economy to come roaring back quickly. I cannot be so optimistic. For one thing is that I don't expect a great deal of "pent up demand" that will last more than a short while. Secondly, a long pandemic changes people's habits. The year long isolation has taught people, they do not need to do some of the things they have done in the past. I do not believe the economy will come roaring back in the same way it was in 2019.
Raymond D. Matkowsky
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