Canadian economy showed a smaller than expected decline over the third wave

Canada’s economy reported smaller than expected decline during a spring wave of COVID-19 cases, following its path of strong performance.

According to Statistics Canada, GDP went down by 0.3% in April with the same drop seen in May. Meanwhile, economists had been predicting a contraction by 0.8% for April.

In spite of the decline, the results show how well Canada’s economy coped with several lockdowns aimed at fighting the virus spread. Such strength is expected to support a significant recovery in the second half of 2021. There are already certain signs of a strong activity in June as restrictions were eased and restaurants and other businesses were able to reopen.

In economists’ opinion, Canada will recover to pre-pandemic output levels in the third quarter, in case we won’t face any further hits from the virus. The declines in April and May (caused mostly by retail closures) have pushed the output down to almost 98.5% of pre-pandemic levels, Bloomberg says.

With such GDP results, the national economy may show at least 2% annualized growth in Q2, following 5.6% reported in Q1. According to the recent Bloomberg News poll, the GDP of 9.1% is expected in the third quarter and of 6% – in the fourth one. At the same time, the central bank has predicted 3.5% growth in Q2.

Large savings accumulated by households will support most of that growth, combined with massive fiscal spending in the system. Higher vaccination rates have allowed Canada to reopen restaurants and bars after months of lockdowns.

These positive results will probably affect the BoC’s next rate decision on July 14, when it may reduce its stimulus again.