TORONTO — The Ontario economy will not see pre-pandemic levels of activity until early to mid-2022, predicts Central 1 regional economist Edgard Navarrete in a recent report.
Central 1 is a financial services firm. Its latest Ontario Economic Analysis forecasts that real GDP will decline 6.0 per cent in 2020, followed by growth of 4.4 per cent in 2021. Economic output is not expected to return to 2019 levels until mid to late 2022 with real GDP forecast to grow by 2.7 per cent in 2022 and 1.8 per cent in 2023.
In 2020, annual average employment growth will recoil 5.2 per cent, contributing to an unemployment rate which will settle at 9.8 per cent. Navarrete suggests the Ontario economy will be impacted not only by significant labour market uncertainty but also by continued public health policies, travel restrictions, increased savings by households for a rainy day and the absence of a widely available vaccine.
“We anticipate an effective vaccine to be made available by early 2021, but deployment lags will mean a slow road back for the economy,” said Navarrete in an Oct. 29 release. “Current public health directives such as mask wearing, physical distancing and controls on congregation sizes could possibly continue for most of 2021 and point to ongoing struggles for businesses and the likelihood of more permanent closures.”
New home construction, a lagging indicator, is expected to rise 17.1 per cent in 2020 to 80,800 units reflecting pre-pandemic demand and sales.
Navarrete states, “Post 2020, new home construction will range between 73,200 units and 74,400 units from 2021 to 2023, below the 2017 to 2019 average of 75,600 units on lower population and household formation growth and big-ticket household spending.”
The accommodation and food services sector has been hard hit and the sector’s contribution to real GDP is forecast to fall 27.7 per cent in 2020. Navarrete suggests pre-pandemic output in this sector is not expected to return until mid-decade, around the time many experts are calling for air travel to recover.
Retail sales will see significantly lower revenues in 2020 as consumers remain skittish with wallets closed. Navarrete said that greater use of e-commerce will support some revenue growth in this sector but not enough to offset less foot traffic at shops.