Even the insulating effect of the federal government won’t be enough to prevent Ottawa-Gatineau’s economic output from contracting for the first time in nearly a quarter-century in 2020 as COVID-19 continues to wreak havoc with key sectors, a leading think-tank says.
The National Capital Region’s GDP is expected to shrink by nearly six per cent this year, the Conference Board of Canada predicts in its latest economic outlook released this week. 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.
“Ottawa-Gatineau’s position as the nation’s capital and home to the federal government often insulates the city from big swings in economic growth,” said the organization, which forecast back in May that the region’s economy would contract by 2.4 per cent in 2020. “However, the city will not escape the impacts of the COVID-19 pandemic.”
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It would be the first time Ottawa-Gatineau’s GDP has contracted since 1996, but the think-tank says the capital region is still in better economic shape than most other Canadian centres.
The Conference Board forecast says Canada’s overall GDP will shrink by 6.6 per cent in 2020 as households tighten their pursestrings and many sectors struggle to recover from a devastating spring and summer. The organization paints an even grimmer long-term picture for industries such as air transportation, accommodations and food and beverage services, declaring they “might never fully return to normal.”
The organization says public administration is the only sector of the local economy that’s expected to grow in 2020. Not surprisingly, the accommodation and food services industry – which has been largely shuttered for much of the pandemic as part of public health efforts to contain the virus – is expected to take the biggest hit, with the Conference Board’s forecast calling for the sector to decline by a whopping 35.6 per cent.
Other sectors facing big declines include retail, which is expected to shrink 6.4 per cent – only the third time in the last two decades its output has fallen year-over-year.
Still, the think-tank says it expects both the local and national economies to bounce back in a big way in 2021, with Ottawa-Gatineau’s GDP expected to grow by 5.2 per cent and the national GDP forecast to rise by 5.6 per cent.
The Conference Board is predicting Ottawa-Gatineau to continue on a growth path in the years ahead, albeit at a slower rate, forecasting GDP increases of 3.6 per cent in 2022 followed by consecutive 1.3 per cent bumps in 2023 and 2024.
The organization made several other economic forecasts, including:
- Ottawa-Gatineau’s unemployment rate – which peaked at 9.5 per cent in June – will finish at 7.4 per cent for the year, compared with a mark of 4.8 per cent in 2019. Employment in accommodation services will feel the biggest impact, plummeting 34 per cent from last year;
- Housing starts – which reached a 35-year high of 11,200 units in 2019 – will fall to 10,700 units this year before dipping below 10,000 in 2021 and the next few years ahead;
- The region’s population will grow 1.5 per cent in 2020, its smallest annual increase in the last five years;
- Ottawa-Gatineau’s per capita household income will rise 3.8 per cent this year, while per capita disposable income is forecast to grow 5.8 per cent.