{"id":1397,"date":"2021-12-08T05:00:14","date_gmt":"2021-12-08T05:00:14","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/2021\/12\/08\/the-great-canadian-restart-how-2022-can-spark-an-era-of-greener-more-robust-growth\/"},"modified":"2025-03-26T04:54:44","modified_gmt":"2025-03-26T04:54:44","slug":"the-great-canadian-restart-how-2022-can-spark-an-era-of-greener-more-robust-growth","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/featured-analysis\/insights\/the-great-canadian-restart-how-2022-can-spark-an-era-of-greener-more-robust-growth\/","title":{"rendered":"The Great Canadian Restart:<\/b> How 2022 can spark an era of greener, more robust growth"},"content":{"rendered":"
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If 2021 was the year Canada rounded the corner on the pandemic recession, 2022 is the year it can accelerate out of a decades-long pattern of slowing growth.<\/p>\n

Though a pandemic recovery is in sight, a slow-growing labour pool and lacklustre record on investment and innovation have set a low speed limit for the economy.<\/p>\n

The greener, more digital and tech-enabled society accelerated by COVID-19 has opened new pathways for growth that could ignite spending, investment and innovation. Businesses and households are lined up to propel this change, but their efforts are likely to be hampered by near and long-standing obstacles.<\/p>\n

As it starts its new mandate, the federal government can help set a new course. Growth-oriented federal and provincial government policies can be the foundation for the increased private investment needed to boost Canada\u2019s growth trajectory. <\/p>\n

Other countries are already remaking their economies in a bid to reverse the secular trend of low and declining economic growth rates. Canada does not want to be left behind. With a skilled workforce, strong record as a tech and energy innovator, and investment opportunities, it doesn\u2019t have to be.<\/p>\n

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Two scenarios for Canada’s real GDP growth<\/b><\/p>\n

$ Trillions<\/p>\n

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Source: Statistics Canada, Haver, RBC Economics<\/p>\n<\/div>\n

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A 6 point plan for growth<\/b><\/font><\/h3>\n

1.\tEmbrace new approaches to innovation policy
\n2.\tForward-looking policy, public infrastructure and blended finance for climate action
\n3.\tPromote services trade and Canadian platforms; protect intellectual property and data
\n4.\tIncrease competitiveness with tax, competition, and regulatory policy
\n5.\tAttract, develop and retain new sources of talent
\n6.\tEducation and labour market policy for lifelong learning<\/strong><\/p>\n

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Back to the starting line<\/b><\/font><\/h3>\n

GDP remains down compared to pre-pandemic levels, due to some particularly weak sectors. But many areas of the economy have already recovered or surpassed pre-pandemic levels. A mix of consumer spending approaching pre-pandemic levels, strong investment intentions, billions in business and household savings, and a supportive external environment will help fuel the ongoing recovery in 2022, even as firms continue to struggle with supply chain disruptions and a labour crunch. RBC forecasts growth of 4.7% in 2021, declining to 4.3% in 2022 and 2.6% in 2023 as it converges to its long-term trend1<\/sup>.<\/p>\n

With the end of the recovery\u2014or cyclical growth\u2014nearly upon us, we face a new question. Following the once in a century shock of the pandemic, how can we build more robust growth into Canada\u2019s economy?<\/p\n\n\n<\/p>\n

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Trend growth<\/b> \u2013 or potential growth \u2013 reflects the long-run sustainable productive capacity of the economy. Actual growth fluctuates around this trend due to short run \u2018cyclical\u2019 factors. Trend growth is estimated based on trend labour supply growth and productivity.<\/p>\n<\/div>\n<\/div>\n

Over five decades, the country\u2019s growth has been anything but dynamic. Real economic growth rates fell from an average of 4.1% in the 1970s to 2.1% between 2010 and 2019. Should we carry on our existing course, we expect a return to a sluggish trend growth of around 1.8% per year beyond 2023, a record reflective of slow labour force growth and muted productivity.<\/p>\n

Canada isn\u2019t alone. Many other advanced economies have experienced the same deceleration, attributed to a greying population, the slowing pace of innovation, and in some cases, post-recessionary economic scarring. The trend has been stubborn, suggesting that underlying structural issues will continue to be a powerful force now and into the future.<\/p>\n

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