Rising Covid-19 infection rates are weighing on short-term economic conditions, but the arrival of vaccines is boosting the provincial economic outlook for 2021, according to a report from TD Economics.
The pandemic picture has shifted significantly in recent weeks, TD said, with the Prairie provinces now enduring the worst outbreak per capita. Meanwhile, provinces hit hard in the first wave — such as British Columbia, Ontario and Quebec — are seeing infection numbers rise again.
Provinces grappling with outbreaks face restrictions that subdue economic activity, and even regions with looser restrictions are seeing declining consumer and business confidence, the report noted.
Yet TD revised its GDP forecasts for 2021 higher due to the early arrival of vaccines.
“On the margin, provinces with a greater exposure to hard-hit services and tourism industries should benefit more. A swifter rebound in commodity prices should also provide support to the Prairie provinces,” the report said.
Continued fiscal stimulus should also support the recovery, TD said, noting that the federal government has pledged $70 billion to $100 billion in support over the next three years.
“Although details are scant, we assume this windfall will benefit provinces coast to coast,” the report said, adding that this could boost growth by one percentage point over the next two years.
At the national level, TD called for a 4.9% rebound next year, following a 5.7% drop in GDP this year. For 2022, it forecast a 3.8% gain.
At the provincial level, Ontario is likely to enjoy the strongest recovery next year. TD forecast that Ontario will see a 5.6% rebound in 2021, followed by a 4.1% gain in 2022.
B.C. and Quebec are also expected to enjoy above-average growth, with predicted gains of 5.1% and 5.0%, respectively.
Alberta is expected to take the hardest hit this year. TD forecast that the province’s GDP will drop 7.3% in 2020. But Alberta should rebound with 4.8% growth next year, and a 4.1% gain in 2022.