Top Canadian banks say economic rebound could happen as late as 2022

CEOs of major banks discuss repercussions of the pandemic on the Canadian economy.
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In Monday’s virtual 2021 Canadian Bank CEO Conference hosted by RBC, leaders of top Canadian banking institutions discussed the domestic economy’s state in the next year. The chief executives forecasted that increased spending will not occur until the latter half of 2021 at the earliest, 2022 at the latest, CBC News reported

Experts also predicted that the speed of consumer-led recovery is contingent on how well the country handles the pandemic, namely with the vaccine rollout.

“We believe roughly four and 4.5 million high-risk Canadians will have to be vaccinated before we can really get back to reopening the economy,” RBC chief executive Dave McKay said. He predicted that such recovery can be attained within 100 days with widely available vaccines.

Executives were optimistic about the promise of COVID-19 vaccines fueling an economic recovery, as well as the government relief packages lowering delinquency and insolvencies. However, McKay insisted that government relief efforts must continue and bolster vulnerable sectors requiring more recovery time, including small businesses, hospitality, and transportation. 

Leaders also warned that the upcoming weeks will be grim due to rising virus cases and stringent public health measures keeping businesses shut in provinces, including Ontario and Québec.

In a Statistics Canada Labour Force Survey released last Friday, employment fell by 63,000, or -0.3%, in December 2020 for the first time since last April. However, 1.1 million Canadian workers were furlough or had hours reduced during the December economic shutdown, compared to the 5.5 million in April 2020.

According to TD chief executive Bharat Masrani, Canadian consumers will also face credit trouble in the tail end of this year and even into the start of next year. 

BMO’s chief executive Darryl White agreed that the upcoming two to four months would be tough but said impaired losses were not occurring at the rate expected. According to White, rent relief, mortgage deferrals, and wage subsidies have help consumers during the pandemic, and banks have established large reserves to tackle bad loans.

Overall, banks have fared well during the pandemic, despite major shifts in their margins, according to McKay.

He predicted that banks must evolve to fulfill consumer needs during turbulent times as the economy rebounds. With banks temporarily shut and reducing business hours, many clients have pivoted to online banking during the health crisis.

“Everything is positioned to watch how clients come back and how they use the branch,” McKay said.

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