Canada’s economy grew 4.6% last year after contracting 5.2% in 2020, the first year of the COVID-19 pandemic, Statistics Canada said Tuesday. .
For the fourth quarter, growth increased at an annualized rate of 6.7%.
According to Statistics Canada, household spending and residential construction contributed the most to economic growth last year, with construction of new homes, resales and renovations reaching near record highs.
The 15.4% increase for the year as a whole was only surpassed by the 17.4% increase recorded in 1983, when the country was emerging from a recession the previous year.
Household mortgage debt rose by an unprecedented $182.4 billion last year, Statistics Canada said, bringing total residential mortgages nationwide to $1930 billion in December.
Output was flat at the end of 2021, as Statistics Canada reported that real gross domestic product was essentially unchanged in December. This puts the Canadian economy 0.4% above its February 2020 level, which was before the pandemic.
Rising interest rates?
The federal agency also indicated in an initial estimate that the Canadian economy grew by 0.2% in January.
This early signal for January came as a bit of a surprise to economists, who were expecting a pullback during the month amid the Omicron wave, which led to the loss of 200,000 jobs.
Royce Mendes, managing director and head of macroeconomic strategy at Desjardins, said the economy likely built on that momentum in February as the country turned its back on the latest wave of the pandemic, which allowed businesses to reopen across the country.
The release of the data comes on the eve of the Bank of Canada’s next scheduled interest rate announcement. Observers expect the central bank to raise its key rate on Wednesday, with more hikes to follow throughout the year.
In addition, Parliamentary Budget Officer Yves Giroux released an update on his outlook on the Canadian economy and federal finances on Tuesday.
Mr. Giroux’s report predicts that the economy, after a weak start to 2022, is expected to grow 3.9% this year, driven by a sharp rebound from the second quarter.
It also anticipates a budget deficit of $139.8 billion for this fiscal year and $47.9 billion for the next fiscal year, which begins in April. Both forecasts are better than those provided by the federal government in its December economic update.
But Mr. Giroux warns that a rosier financial situation for the federal accounts, helped by a better-than-expected economy, could easily deteriorate.
The Parliamentary Budget Officer pointed to the one-off Liberal election promises amounting to $48.5 billion in new spending. If a large part of these appeared in this year’s budget, Mr. Giroux warns that the debt and deficits would increase.