The Canadian government’s efforts to bolster the economy against the effects of the Covid-19 outbreak will help cushion the blow, but Canada will still see a recession this year, Moody’s Investors Service says.
In a new report, the rating agency revised its forecast for the Canadian economy this year from 1.5% growth to a 2.2% contraction in GDP.
“As in many countries, the Canadian government’s containment measures will slow the spread of the virus, but severely affect economic activity and growth. However, the emergency fiscal measures will help to cushion the shock,” it said.
Looking ahead to 2021, Moody’s now expects 2.4% growth in Canada, “as economic activity normalizes, supported by the government’s policy response.”
That response includes emergency aid to support both households and businesses negatively impacted by public health efforts to contain the virus.
“We expect Canada’s efforts to contain the virus will allow the economy to rebound in the second half of the year after the virus subsides and people return to work,” it said.
However, the rating agency cautions that this reflects its current assumptions.
“Ultimately, the extent of the virus’ spread and depth and duration of the economic shock remain highly uncertain,” it said.