IMF: Canadian GDP To Make Biggest Contraction Since The Great Depression

An already slowing global economy is seeing more downward revisions to forecasts, due to the pandemic. The International Monetary Fund (IMF) is the latest organization to lower Canada’s 2020 GDP forecast. The organization sees the economy making the biggest contraction seen in generations. On the upside, they see a return to growth next year. Next year’s optimistic growth would still have Canada far from a v-shaped recovery.

Canadian Economy To Contract Over 6% This Year

The Canadian economy is expected to make a large contraction this year. According to the IMF’s latest forecast, Canada’s real GDP will contract 6.2% in 2020. This is down 8 points from the 1.8% growth forecasted as recently as January. The decline is a little larger than the 6.1% average drop forecasted for all advanced economies. For context, this decline is twice the size Canada saw during the Great Recession. It’s even almost twice as big as the decline seen during the 1980s recession as well. Ask your parents what that was like.

Real Gross Domestic Product Forecast

The annual change in gross domestic product, and the IMF forecasted change.


Source: IMF, Better Dwelling.

Growth Is Expected To Return Next Year, But Lagging Peers

A sharp decline is often accompanied by a rebound, and that’s what the IMF is forecasting as well. In 2021, the organization forecasts Canada’s real GDP will grow 4% from a year before. This is an increase of 1.8 points from their previous forecast. Growth is 13.79% lower than the average forecasted for all advanced economies. Canada will do a little underperforming on the other side.

Even With The Bounce, Canada’s Economy Will Lose Years

Don’t get too excited about the growth – years of productivity will still be lost. By the end of this year, the IMF forecast places Canadian GDP where it was in 2017. After next year’s optimistic bounce, the GDP will be around where it was in 2018. That’s almost half a decade wiped out, assuming the pandemic’s impact is contained to this year.

GDP falling back a few years doesn’t sound like it’s all that bad – does it? It does when you factor how quickly Canada’s population has been growing. If GDP rolls back to 2017 levels, we still have the post-boom population growth to deal with. The economic output would be spread over many more people. Put blatantly, it wouldn’t feel nearly the same as it did then.

The issue is further complicated by population driven economic growth. Just a few months before the pandemic, Canada’s GDP growth had been contracting on a per capita basis. In order to get Canada back to normal, the IMF’s forecast likely depends on Canada resuming GDP growth solely by immigration. This is optimistic, since immigration tends to slow, or even halt, during a global economic downturn. We’ll unpack the immigration analysis a little later this month.

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  • Trader Jim 2 years ago

    Interesting to see Canada and the US growth compared during the Great Recession. Highlights that the demographic impacted is what people hear about.

    In Canada, the Great Recession largely impacted businesses, such as manufacturing.

    In the US, it was a consumer crisis. Much more news worthy. Now we’re looking at the opposite. 0ur households are heavily indebted, and their household debt is slim. Their corporate debt is a massive bubble, but our corporate debt is slim.

    Great presentation earlier today btw.

  • Jared 2 years ago

    Classic fear mongering. If GPD drops 6%, and rises 4%, we’re only 2% down. that’s 2019 levels.

    • Jason Chau 2 years ago

      I can’t even with this math.

      Index it with 2019 as base 100.

      2019: 100
      2020: 93.8 (-6.2%)
      2021: 97.6 (+4.0%)

      Bigger numbers drop faster. Smaller numbers grow slower.

  • Ed Kolopolous 2 years ago

    Weaker loonie is coming too. Plan for higher consumer good costs, since we import almost everything.

    • Coop 2 years ago

      Yes, and you’re going to get the “no inflation” story we have in the US afterwards as well, while consumers very much disagree.

      Higher prices on things you buy everyday, but mortgage interest is lower, so let’s call it a wash.

      • neo 2 years ago

        Going forward mortgages won’t be going any lower than they are. If anything it will be harder to even qualify for a mortgage so the actual rate isn’t the issue it will be access to credit with all this unemployment. Especially since the inflation is happening over the next several months/years and rates will be flat at best over that time.

  • Seb 2 years ago

    Something to consider will be how taxes will look like on people at city/provincial/federal levels. Those massive bailouts from governments on top of their taxation revenue having collapsed will leave a hole behind that nobody will be able to ignore…..higher taxation at every levels is coming and this will create additional drag on the economy. How much? We shall see!

  • Oakville Rob 2 years ago


    Since January Canada has seen an oil crisis affecting a primary natural resources, a rail crisis causing shipping to stop for almost a month and, btw, an unresolved reexamination of who actually has title to Canada, and then a global pandemic that has stopped, and will continue to stop, the global economy for the better part of a year.


  • Rob 2 years ago

    Real estate industry will say that it’s never been a better time to buy a house

  • straw walker 2 years ago

    Unfortunately economic recoveries are not like the “V” bottom recoveries that the stock market makes.
    Economic recoveries take time, and with this recovery new directions will have to be learned ..The wuhan virus will definitely change our social attitudes and with it many new business styles will emerge.

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