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October 28, 2021

Canada’s robust economic growth – leading macroeconomic influencers

Canada’s economy is expected to grow by 5% in 2021, before moderating to 4¼% in 2022 and 3¾% in 2023.

The BoC expects demand to be supported by strong consumption, business investments, and a rebound in exports as the US economy continues to recover.

Angella MacEwen

Angella MacEwen, a senior economist at the Canadian Union of Public Employees (CUPE) and a policy fellow with the Broadbent Institute, shared an article on the Bank of Canada (BoC) ending quantitative easing (QE) and moving into a reinvestment phase to buy Government of Canada bonds. It believes that the economy will need considerable monetary policy support as supply chain bottlenecks continue to drive elevated inflation.

Canada has reported robust economic growth, following a pause in the second quarter, while supply side shortages continue to limit its productive capacity. Strong employment gains in recent months were focused on hard hit sectors and workers most affected by the pandemic lockdowns. This has reduced the disproportionate impact on workers, but slack remains in the overall labour market as the economy reopens.

The BoC has stated that the Canadian economy still requires monetary policy stimulus to boost recovery and to achieve its 2% inflation target. The Bank is also monitoring labour costs and inflation prospects to ensure that the temporary factors pushing up prices do not become a constant feature in the ongoing inflation.

Richard Murphy

Richard Murphy, a political economist, professor of accounting at Sheffield University Management School, and the co-founder and continuing activist for the Green New Deal, retweeted an article shared by Prof Alice Roberts, a professor of the public engagement in science at the University of Birmingham, on the UK’s test-and-trace system having failed to achieve its primary aim of cutting Covid-19 transmission rates and help Britain return to normal.

The National Health Service (NHS) test and trace system had received about 20% of NHS’s entire annual budget, amounting to $50.85 over two years. It had been set up in May 2020 and led by Dido Harding, a Conservative peer and chairwoman of NHS Improvement, as the UK emerged from its first Covid-19 lockdown.

A House of Commons Committee report suggests that the Covid-19 test and trace system has failed in preventing rising in infections, as Covid-19 cases surged towards the end of October 2020, forcing the government to impose two more national lockdowns. The system is regarded as the key pillar of Britain’s Plan A approach to stemming the rise in Covid-19 cases from autumn until winter, but comes at a time when the government is resisting adopting new measures to curb the transmission rates.

More than 60% of the people who experience Covid-19 symptoms in the UK have reportedly not been tested, while many vulnerable groups, ethnic minorities, and older people are less likely to use the service. The report thereby highlights that the uptake of the service is still variable.

David Blanchflower

David Blanchflower, an economist and professor of economics at the Dartmouth College, Hanover, New Hampshire, retweeted an account by Richard Hughes, chairman of the Office for Budget Responsibility (OBR) on the impact of Brexit on the UK GDP, shared by Lewis Goodall, a policy editor for BBC Newsnight. Hughes confirms that in the long term, OBR has forecasted that the Brexit will have a bigger impact on the UK GDP than the Covid-19 pandemic.

Hughes further stated that as per the most recent forecasts, the effect of the pandemic will reduce the potential output by 2%, while data on the impact of Brexit, which especially takes into consideration the new trading arrangements that came in in January, broadly assumes that it will reduce the UK GDP by 4%.

 

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