As many local residents and businesses feel the financial hit from COVID-19, a leading think-tank has estimated the pandemic’s impact on the region’s economy.
The Conference Board of Canada predicts that Ottawa’s GDP will contract by 2.4 per cent in 2020. To put that number in context, the city’s economy has grown by an average of 2.7 per cent annually over the last five years.
The think-tank assumes that physical distancing measures will be slowly relaxed over the spring and summer, but that the effects of the pandemic on the economy will persist until a vaccine is available. It forecasts that Ottawa’s economy will resume growing in the third quarter and continue expanding in the new year, with GDP growth hitting 4.9 per cent in 2021.
The outsized influence of the federal government on the local economy means Ottawa will fare better than many other Canadian cities. Nationally, the Conference Board predicts that Canada’s economy will contract by 4.3 per cent in 2020 before rebounding the following year with GDP growth of six per cent.
However, that will likely be of little comfort to several hard-hit industries that are experiencing their sharpest downturn in a generation:
- Travel restrictions and physical distancing measures will cause output from Ottawa’s accommodation and food service industry to drop more than 41 per cent, while the city’s arts and entertainment sector will see a decline of 18 per cent;
- The city’s finance, insurance and real estate industry will contract by 0.5 per cent – a slightly steeper drop than during the 2008-09 recession;
- The city’s retail sector, already threatened by online shopping, will fall 3.4 per cent this year – the largest decline since 1991.
The Conference Board made several other economic forecasts, including:
- The local unemployment rate – which has been escalating for the last two months – will peak at seven per cent;
- Housing starts – which reached a 35-year high of 11,200 units in 2019 – will remain above 10,000 units this year and next, with the resale market returning to favour sellers;
- Population growth will slow to 22,200 new residents in 2020, down from almost 30,000 last year.