Daily Management Review

Bank of Canada: Economic recovery will require significant stimulus


Bank of Canada intends to provide significant stimulus to the economy for the foreseeable future to help the country recover from the damage caused by the novel coronavirus pandemic, the Governor of the Bank of Canada Stephen Poloz said this on Monday.

Tony Webster via flickr
Tony Webster via flickr
He is confident that the Canadian economy is able to withstand the worst effects of the virus, as it was healthy before the pandemic. In order to curb the spread of the new coronavirus, the authorities of Canada and other countries of the world have introduced measures that have limited economic activity. The number of unemployed is growing, and this week data is expected to indicate that the country's gross domestic product in the 1st quarter fell by 10%.

The central bank's balance sheet has risen sharply since mid-March, reaching over 400 billion Canadian dollars (285 billion US dollars) against almost 120 billion Canadian dollars.

According to him, these measures are aimed at avoiding depression caused by the virus, which will lead to higher levels of debt, especially in the public sector. "Returning the economy to the growth path, which is necessary to achieve the inflation target, is a reliable means to service this debt in the future," he said.

It is not yet clear how long the Bank of Canada will needs to keep the mitigation policy, given the uncertainty about the virus, including the likelihood of a second wave of the epidemic. Poloz believes that the authorities will rely heavily on rough estimates in their decisions. The term of office of Poloz expires on June 2.

At his press conference last week, Poloz expressed confidence that the economy is looking to recover in accordance with the most favorable scenario, although it may take at least a year for growth to return to the trend that began before the pandemic.

source: dowjones.com