Toronto, O.N., June 11, 2020 –
Ontario faces an uncertain economic recovery as it gradually resumes business activity amidst a COVID-19 induced recession which saw 1.1 million jobs lost in Ontario between January and April, according to Central 1 Regional Economist Edgard Navarrete.
In Central 1’s latest Ontario Economic Analysis, Navarrete outlines that the province’s annual real gross domestic product (GDP) is forecast to contract by 7.4 per cent in 2020. “This contraction will be driven by sizeable trade exposures in tourism, new car production, agriculture and diminished domestic consumption in housing and retail,” said Navarrete.
Poor business conditions are forecast to continue into mid-year before a re-opening of the economy underpins a stronger recovery phase through 2021, when GDP is expected to see 5 per cent growth, followed by 2.6 per cent and 2.5 per cent growth in 2022 and 2023. The unemployment rate will gradually improve but will remain above trend over the next four years.
“Many businesses that were already struggling pre-crisis may not survive the pandemic, compounding the drag on growth going forward even as the economy opens up,” said Navarrete, adding: “Some sectors will be more insulated, such as businesses which can utilize e-commerce and those with workers who can work effectively from home, for example: professional, scientific and technical services and public administration.”
Population growth which has traditionally been an economic driver in the province will slow down to 1.2 per cent in 2020 and will range between 1 and 1.3 per cent over the next three years due to immigration and border restrictions.
Accommodation and food services has been Ontario’s hardest hit sector this year as the pandemic shut down the tourism sector. It is forecast to experience a 27.5 per cent fall in GDP.
The motor vehicle manufacturing sector will remain challenged through to 2023, with output expected to fall by 19.3 per cent this year, according to Navarrete. “New car production is a key sector in Ontario, employing a sizeable share of the labour force and accounting for a substantial share of GDP,” he said, adding: “The auto sector was facing headwinds prior to the pandemic as the General Motors plant in Oshawa began winding down as a result of waning demand domestically and internationally, especially in the U.S. which is a key market for Ontario autos.”
Ontario’s housing market is set to remain frozen for half the year, gradually recovering over the back half of 2020. Navarrete states: “Yet, even with a strong surge in activity expected in the second half of 2020 when buyers and sellers are once again able to close on deals, a sales contraction of between 10 and 20 per cent is likely in the home ownership market in 2020.”
The fact that Ontario is beginning to reopen its economy offers a glimmer of hope, according to Navarrete, who said: “It is likely that April and May data will be the trough from which a tempered and uncertain recovery begins.”
- Baseline Ontario forecast: real GDP contracts by 7.4 per cent and unemployment surges to 10 per cent in 2020; recovery trajectory very uncertain as virus dictates pace of reopening
- Gradual economic recovery expected through second half of 2020 with unemployment to remain above trend over forecast horizon
- Average home values hold up, but new housing starts to contract by 29 per cent this year
- Motor vehicle manufacturing faces continued headwinds
About Central 1
Central 1 is a preferred partner for financial, digital banking and payment products and services – fuelling the success of businesses across Canada. We leverage our scale, strength and expertise to power progress for more than 250 credit unions and other financial institutions, enhancing the financial well-being of more than 5 million customers from coast to coast. For more information, visit www.central1.com.
– ENDS –
Meadhbh Monahan (pronounced ‘Maeve’)
T 236 885 3363