The good news? Pandemic under control. The bad news? Very slow growth, high debt, higher taxes, high unemployment.
The future is imaginary, said philosopher Baruch Spinoza. We don’t and can’t know what will happen in the future and last year certainly demonstrated that.
Nevertheless, the desire to see what the new year will bring always overcomes the future’s inherent mystery.
We peer into our crystal balls and bravely prognosticate, knowing full well that we will be at least partly in error and perhaps totally off base.
However, especially at this time of year the temptation to delineate the coming 12 months is irresistible. Here’s my perspective on the medical and economic outlook for Canada in 2021. Feel free to tell me a year from now how wrong I was.
First, the pandemic. A few weeks ago, the outlook was much brighter. The vaccines were coming. By the end of the summer, almost everyone would be vaccinated and the pandemic could be behind us.
The situation is less certain now. There’s a new, more contagious version of the virus. We don’t know how effective the vaccines are against this or for how long any jab will provide protection. The costs and logistics of getting, distributing and administering the vaccine are considerable.
Will everyone who’s offered the virus be willing to take it?
In Canada, anti-vaxxers are relatively few, probably not enough to prevent the herd immunity that ends a pandemic when about 70 per cent of the population is vaccinated.
In the United States, the situation appears to be different. The vaccine is now being offered to health-care workers there. These are people with some scientific background and a face-to-face awareness of what the COVID-19 virus looks like and can do.
Yet over half of such American workers are declining the vaccine. They feel safe because they haven’t got COVID-19 yet and think they won’t get it later. Or they cite some nebulous ‘political’ reasons for refusing the jab.
This leads one to expect that an even higher proportion of the general population will also turn down the vaccine when it’s offered, delaying herd immunity and breathing more life into the pandemic south of the border.
In Canada, I anticipate pretty full vaccine coverage and thus the removal of most pandemic restrictions by the end of 2021. Having recovered from COVID-19, we can then turn our attention to the economic recovery.
The good news is we’ll be heading in the right direction. The economy will be growing. It already has been for several months, albeit slowly, and it still hasn’t quite reached the level it was at the start of 2020. Employment has also been increasing but it hasn’t yet compensated for the catastrophic drop last March and April.
That we’re moving in the right direction is due at least in part to the intervention of governments. The federal government in particular provided generous financial handouts at the start of the pandemic and continues to do so.
That fiscal generosity is what prevented the pandemic from becoming a major economic disaster, but it’s contributing to large and growing government debt.
Nor are these funds as effective as they might be.
Dollars are distributed widely to individuals without looking too closely to see who the recipients are. We’ve all heard of individuals and small businesses badly hit by the pandemic, but who didn’t get government help. We’ve all seen people who the pandemic hasn’t hurt financially receiving funds they didn’t need, leading to higher savings and a ballooning stock market. Such funds don’t directly help the economy.
Government money could be much more effectively spent investing in the infrastructure needed to keep Canada productive and competitive.
Even better, invest in the Canadian people through education, training and labour market information that will enable all those who face pandemic-generated job disruptions to adjust and prosper in the post-pandemic economy.
Where does this leave 2021?
The Canadian economy will grow, but more at a rate that has been called a black zero than anything stronger and this slow growth will continue past this year.
More people will be seeking work and more employers will seek workers as the mismatch between the skills workers have and the ones companies want becomes even wider than it was before the pandemic.
Slow growth, pandemic-related losses and debts mean that firms and governments won’t be in a position to offer pay raises.
We can also fearlessly forecast higher taxes, although they may not appear until after 2021.
Most sectors will inch slowly toward their 2019 levels but some will take longer than others. For travel and tourism, some industry watchers don’t expect full recovery before 2025. A closed United States border due to an uncontrolled epidemic there would especially hurt the industry.
This year will see the end to the pandemic in Canada, if not everywhere. The situation for most businesses and workers will very gradually improve. But conditions like the 50-year low in unemployment that we enjoyed at the start of last year are still a long way off.
Troy Media columnist Roslyn Kunin is a consulting economist and speaker.
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