Canada's Economy Eked Out Slight Growth to Start 2022, Despite Omicron

The COVID-19 pandemic is not over yet. The presence of variants like Omicron is still scaring people all over the globe. Even the economies of different countries are also suffering. Thankfully, there is some good news for Canadians as Canada's economy eked out slight growth to start 2022, despite Omicron. Keep reading to know more.

The Reason

One of the key reasons the Canadian economy did okay despite the pandemic is that the goods-producing sectors did good and attained growth. The services sectors were and are not in great shape.

Expanded GDP

According to Statistics Canada, Canada's gross domestic product increased by 0.2% in January this year. It's the eighth straight increase in a row. In December, there was a small increase of 0.1%. The outputs in the good-producing sector rose by 0.8% in January, and the leader was the construction sector.

Businesses in the accommodation, food, entertainment, arts, and recreation sectors saw a decline of 10% (or more) in their economic activities in January 2022 as people stayed home due to the Omicron threat. Thankfully, these services rebounded in February and beyond. The economy grew by 0.8% in February, led by industries like mining, manufacturing, accommodation, oil & gas extraction, food services, and construction.

Economist Royce Mendes from Desjardins stated, "Despite the Omicron wave, the Canadian economy was able to keep its foot on the gas in January. And, by February, it was again time to hit the accelerator."

The Outlook

The Conference Board of Canada has released its two-year economic outlook. It forecasts real gross domestic product (GDP) growth of 4% in 2022  and 3.3% in 2023. The outlook for overall growth is essentially unchanged from the Winter Economic Outlook, which was released in January.

Ted Mallett, Director, Economic Forecasting, The Conference Board of Canada, stated, "Although restrictions are being gradually removed at varying rates across Canada, Omicron's BA.2 sub-variant is on the rise, indicating the pandemic is likely not finished yet. Adding to this uncertainty, the Russian invasion of Ukraine brings plenty of future risks and unknowns to our outlook."

The Conference Board of Canada thinks that the surge in commodity prices created by Russia's actions will affect our economy. The sudden rise in oil and gas prices will boost the bottom lines of Canadian producers and government tax and royalty revenues.

Similarly, grain and oilseed prices have also risen because of concerns that Russian and Ukrainian production will be down considerably this year.

The forecast by The Conference Board of Canada is based on the assumption that sanctions on Russia will be there for the medium term and will keep the resource prices up.

It is also likely that the Russia-Ukraine war will negatively affect global supply chains. Also, the rise in oil prices will ensure that transportation costs keep going high. It will eventually put upward price pressure on internationally traded goods. The Conference Board of Canada also expects that the war in Ukraine will remain within those borders.


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