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Analysts at Standard Chartered downgraded their GDP forecast for Canada during 2020 from -4% to -8% and raise it for 2021 to 6.7% from 2.7%. According to the unemployment could rise to 30%. 

Key Quotes: 

“We now expect the economy to contract by 8.0% in 2020 (previously -4.0%), with H1 in deep recession. A recovery in activity in H2-2020 should underpin 2021; we now expect GDP growth of 6.7% in 2021 (previously 2.7%). Statistics Canada estimates that GDP fell by 9% in March, resulting in a quarterly drop of 2.6%, the largest one-quarter drop in GDP on record.”

“Employment fell by over 1mn in March (eight times as much as the previous record decline in 2009); job losses could exceed 5mn, taking the unemployment rate to 30% or higher.”

“Bank of Canada (BoC) governor-designate Tiff Macklem takes over on 3 June, the date of the next BoC policy announcement. He has indicated that he is comfortable with an effective lower bound of 0.25% for BoC rates, warning that negative interest rates could be “disruptive”; in our view, a rate cut to 0.10% or 0.15% cannot be ruled out.”

“We think that Macklem may be more inclined to support an increase in government bond buying if further policy stimulus is required, as well as potentially extending the tenor of BoC liquidity measures.”