Economy to sink 6% this year, bounce back in 2021, says BMO report
- July 29, 2020
The BMO Blue Book, an outlook created from business data gathered from the bank’s customers, forecasts the Canadian economy will contract by roughly 6 per cent in 2020, by far the deepest annual decline in economic activity in the post-war era.
"We have consistently maintained since the shutdowns began, growth is expected to rebound to roughly 6 per cent [in 2021], helping bring the jobless rate down markedly," said Doug Porter, Chief Economist, BMO Financial Group.
BMO says small businesses have been more adversely affected by the economic impact of lockdown.According to Mike Bonner, Head of Business Banking at BMO Bank of Montreal, how small business rebounds will influence Canada’s recovery as a whole. "It's crucial that we all help small businesses bridge the gap back to profitability – they are the foundation of local economies across this country and account for a large portion of local tax revenue and local employment," he said.
BMO’s provincial forecasts at-a-glance:
British Columbia's economy is expected to contract 5.3 per cent this year but rebound by 6.3 per cent in 2021. Unemployment is expected to remain below the national average.
Alberta's GDP decline will be deeper than in the rest of the country. The province has been faster to re-open, with the CFIB reporting that almost 60 per cent of small businesses were fully open as of mid-June.
Saskatchewan's economy will contract 6.2 per cent this year. The province’s COVID situation has been milder than most other provinces, allowing it to re-open earlier.
Manitoba's economy is expected to contract 4.8 per cent in 2020, milder than the national decline. Manitoba has typically weathered downturns much better than the rest of Canada, but COVID-related lockdowns still weigh heavily.
Ontario will likely contract 6.0 per cent this year, in-line with the decline expected nationally. The province entered the downturn in a position of strength but struggled with a steeper COVID curve early on.
Quebec will see a6.3 per cent decline, slightly worse than the national figure given more widespread shutdowns early in the pandemic.
Nova Scotia, New Brunswick and PEI are all seeing mild GDP contractions when compared nationally, with reductions of 3.8 per cent, 3.2 per cent and 3.0 per cent, respectively. Faster re-opening in these provinces provided significant benefits.
Newfoundland & Labrador is expected to contract 7.5 per cent this year, deeper than the decline expected nationally. The province was already in a challenged position pre-COVID, and current shutdowns and the decline in oil prices will cut into growth.