GDP to remain below pre-virus trend for years

Canada’s relative success in containing the virus so far and the generosity of government income support suggest that the initial rebound in consumption will be stronger than we previously anticipated. But weak external demand and low commodity prices imply that exports and investment will lag. GDP is set to fall by 6.3% this year and our forecast for a 5.5% rebound in 2021 implies that it will remain below its pre-virus level until early 2022. Against that backdrop, we expect the federal budget deficit to remain wide and think the Bank of Canada will continue its asset purchases for at least another 12 months.