Wilkins Says Canada Will Exit Pandemic With Lower Potential

The Bank of Canada’s top deputy said the country is likely to come out of the pandemic with a lower outlook for potential growth and permanent labor force scarring, and that conventional wisdom must be challenged to find solutions.

In a speech Thursday, Senior Deputy Governor Carolyn Wilkins reiterated the central bank projects potential output will be 3% lower by the end of 2022 versus their pre-pandemic forecast, with weak capital investment accounting for the bulk of the reduced potential. She said policy makers and businesses will need to think outside the box to find solutions.

“The pandemic has damaged the potential for Canada, and other countries worldwide, to generate sustainable economic activity,” Wilkins said via webcast to the Munk School of Global Affairs and Public Policy. “We need to set our sights higher to help businesses create good jobs and to make high debt loads more manageable.”

Investments in areas such as education, infrastructure, technology and greening the economy would help potential output growth, Wilkins said, adding that education improves social mobility and skills in the workforce.

Other examples of policies that promote both social and economic goals are childcare, which boosts female participation in the workforce and the government’s wage subsidies, which allow employer and employee connection to remain intact.

“How exactly these are designed, however, is the subject of much debate.” said Wilkins, whose last day at the bank will be Dec. 9. She will be stepping down from her role as senior deputy governor after nearly seven years.

— With assistance by Erik Hertzberg

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