Canada’s economy outperformed expectations in the final months of 2020, despite a pandemic year that saw the economy shrink by the largest percentage on record.
Based on preliminary December numbers, Canada’s economy will likely have shrunk 5.1 per cent in 2020, Statistics Canada estimated, making it the steepest one-year drop in records going back to 1961.
By comparison, the U.S. economy shrank 3.5 per cent last year, the largest drop since the Second World War, according to preliminary data released this week. Britain’s economy shrank an estimated 11.3 per cent in 2020, the steepest one-year contraction in 300 years.
Watch: U.S. economy sees worst performance since 1946. Story continues below.
At least in Canada, the tail end of 2020 showed signs of improvement, with the economy growing a stronger-than-expected 0.7 per cent in November. StatCan’s flash estimate for December showed 0.3 per cent growth.
That’s a better end to the year than analysts had been expecting, given the shutdowns that went into effect in November and December to slow the spread of COVID-19.
“The economy is showing resilience in the face of rising cases and renewed restrictions,” TD Bank economist Sri Thanabalasingam wrote in a client note.
“The broad-nature of the advance suggests industries have, to some degree, adapted well to the pandemic.”
Royal Bank of Canada senior economist Nathan Janzen predicted that the lockdowns “likely bit more significantly on overall growth in January,” but the slowing spread of the virus means restrictions could be eased “as early as February.”
If so, Canada’s economy could avoid a contraction in the first quarter of the year, Janzen wrote.
“Beyond the very near-term, a more sustainable recovery in GDP back to ‘new normal’ levels still depends heavily on the rollout and effectiveness of vaccines,” Janzen added.