Canada’s recovery from the pandemic is at a very difficult stage, as rising COVID-19 infections dampen growth in the near term and “could even deepen the economic hole,” Bank of Canada governor Tiff Macklem said on Tuesday.
Macklem told the Greater Vancouver Board of Trade that household spending had so far led the recovery but for that recovery to be sustainable, Canada would need to boost exports, productivity and business investment.
“The economic recovery from the pandemic is at a very difficult stage. Near term, rising COVID-19 infections will dampen growth and could even deepen our economic hole,” he said.
“Uncertainty is elevated, and the recovery is going to be long and choppy.”
Macklem said exports and business investment could bounce back more quickly than after the 2008 global financial crisis, but warned that services exports would struggle until a vaccine is widely available.
He reiterated that recent vaccine news was positive and said it had put a more certain time line on the resurgence in global demand.
Macklem expressed concern, however, about the strengthening Canadian dollar, which he said was hurting Canada’s exports in the crucial U.S. market.
The Canadian dollar held near its strongest level in more than 2½ years at 1.2694, or 78.78 US cents, after the speech.
Macklem said Canada needed to scale up production of high-value goods and services for export, noting the pandemic had accelerated growth in technology services from healthcare to remote work.
“We do need to develop new, fast-growing markets for our products, but we also need to develop new, fast-growing products for our markets,” he said.