Canada will face lower potential when the pandemic ends

The Bank of Canada’s Senior Deputy Governor Carolyn Wilkins expects the country to come out of the pandemic showing a lower outlook for potential growth and significant labor force challenges. In her opinion, a non-standard thinking is necessary in order to solve such problems.

She reiterated the Bank’s forecasts on potential output which could be 3% lower by the end of 2022, than it was expected before the pandemic. The main reason for it will be low capital investment.

“The pandemic has affected the potential for Canada, and other countries, in terms of providing sustainable economic activity,” – Wilkins noted. “We need to be ambitious in order to help businesses create good jobs and to manage high debt levels”.

According to Wilkins, investments in education, infrastructure, technology and greening the economy will help potential output growth. In addition to it, education improves social mobility and skills in the labour market.

Other measures improving social and economic goals are childcare, increasing female participation in the workforce, and the government’s wage subsidies, keeping employer and employee connection unchanged.

“The question is how exactly they are designed,” – said Wilkins, who will leave the senior deputy governor position on December 10, after almost seven years.