The Canadian economy will rebound strongly and grow by 6.1% in 2021 and 3.8% in 2022, thanks to reduced COVID‑19 restrictions in the second half of this year and buoyant external demand. These developments will be echoed in a recovery in the labour market. Nevertheless, output levels will remain below trend and underlying inflationary pressures will be contained. After increasing again in 2021, the public debt burden will stabilise in 2022.
Government schemes supporting businesses and households experiencing revenue and income losses need to remain available until economic recovery is well underway. Monetary policy should remain accommodative, accompanied by a close watch on housing and corporate debt, with further tapering of quantitative easing contingent on signs of strengthening conditions. Reforms proposed in the National Budget 2021 suggest positive advances in social and environmental policy and for the business environment. The reduction in the fiscal deficit in 2022 is appropriate. However, once the economy is on a firm footing, a medium-term fiscal strategy to reduce public debt should be considered.