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Summary
- Bank of Canada governor Tiff Macklem pointed in a recent address that the rising numbers of COVID-19 infections could put a dent in Canada’s growth and “deepen the economic hole”.
- He added that in order to trigger a full-scale recovery, the country needs to expand its exports.
- The BoC chief noted that the arrival and administration of COVID-19 vaccines provides some “reassurance” regarding normalcy returning to Canada by the later part of 2021.
The Canadian economy could post another decline due to the second wave of the coronavirus cases, Bank of Canada (BoC) governor Tiff Macklem noted in his last speech on 2020 on Tuesday, December 15.
Mr Macklem, in his virtual address to the Vancouver Board of Trade, pointed that the rising numbers of COVID-19 infections could put a dent in Canada’s growth and “deepen the economic hole”.
He reiterated points that he has been making since the onset of the pandemic – that Canada’s economic recovery from the pandemic-induced challenges would be “long and choppy”. He added that in order to trigger a full-scale recovery, the country needs to expand its exports.
While international trade has rebounded since initial lockdowns, some operational disruptions continue to fester. On top of that, the rising tide of COVID-19 cases in Canada has forced provincial governments to bring back lockdown protocols, which, in turn, has been interrupting the recovery of businesses. Mr Macklem pointed that this could lead to a tightening in the economy in early 2021.
The top lender governor also told reporters that as per data, Canada is expected to record a minimal increase in its output in the last few months of 2020. The first quarter of 2021 is likely to see a moderately positive or negative output, he said.
The BoC chief also, however, noted that the arrival and administration of COVID-19 vaccines in the country provides some “reassurance” regarding normalcy returning to Canada by the later part of 2021.
Overall, Mr Macklem’s speech on Tuesday outlined how important international trade, exports in particular, is to Canada’s economic recovery from the trenches the pandemic has put us in. He also gave directions regarding how policymakers and businesses can attract investment and better themselves for competition in global markets.
Bank of Canada Still Holding Historically Low Interest Rates
The Bank of Canada reimplemented its record low key interest rate of 0.25 per cent earlier in December. In an official briefing, the central bank said that it will stick to this interest rate until the country meets a two per cent inflation objective.
Mr Macklem also said in November that the BoC will maintain its current quantitative easing (QE) program till the country’s economic recovery is well underway. He added that the QE program, which consists of the BoC buying government bonds worth at least C$ 5 billion each week, is helping the central bank retain a low borrowing cost.
Mr Macklem reassured in his speech on Tuesday that the Bank of Canada will keep supporting the country’s “investment climate” by maintaining low borrowing costs till the economic slack subsides.
