MNI POLICY: BOC:Canada Faces Pandemic 'Still in Full Throttle'

The Covid-19 pandemic is still raging and policy makers must find new ways to boost long-term productivity that offsets scarring to laid-off workers and struggling businesses owners, Bank of Canada Senior Deputy Governor Carolyn Wilkins said Thursday.

"The pandemic is still in full throttle, so we continue to face considerable challenges," Wilkins said Thursday. "The recovery will take time, however, and will require policy support for a while." The BOC has already pledged to hold its key rate at 0.25% into 2023.

"We expect that COVID-19 will leave an unfortunate economic legacy through its impacts on investment, the workforce and productivity," Wilkins said. "Many of those scars could become permanent without deliberate actions from all of us."

Canada is more vulnerable than most nations to slower economic growth potential because of its reliance on foreign capital markets and its current-account deficits, Wilkins said.

Three-quarters of the BOC's estimated decline in potential growth stems from slower business investment, especially from an oil industry crushed under low global prices. Turning that around requires the public and private sectors to support the economy through the pandemic and also go further to boost longer-term productivity, she said.

"Growth can change our collective room to deal with the pandemic. It can also change investors' and credit rating agencies' views of the risks," Wilkins said.

"There's no doubt that the debt burden would be easier to carry with a stronger trend line on incomes and the tax base."

Wilkins also said it's too early to draw any firm conclusions on the central bank's review of its 2% inflation target, which is up for a renewal of the five-year mandate in 2021.

It's the last scheduled public speech for Wilkins before she leaves the BOC on Dec. 9, well ahead of her seven-year term that ran until May, and her remarks didn't address what she might do next. She was seen as a strong candidate to replace Governor Stephen Poloz when he retired in June and was replaced instead by Tiff Macklem, himself a former top deputy.