The article discusses the impact of the Omicron variant on the Canadian economy, as predicted by Bank of Canada Governor Tiff Macklem. While acknowledging that Omicron may lead to disruptions in supply chains and economic growth, Macklem believes that these effects will be temporary and short-lived.
Here are some key points from the article:
- Economic momentum: Despite the potential disruption caused by Omicron, the Canadian economy has built enough momentum to handle the current situation. The labour market is strong, with employment returning to pre-pandemic levels this fall.
- Inflation pressures: However, Macklem notes that the increased demand for goods during previous lockdowns and restrictions may lead to continued inflationary pressures. Gasoline prices are a significant driver of Canadian inflation, but oil prices have dropped in anticipation of less demand.
- Supply chain disruptions: Tighter health restrictions could result in additional supply disruptions, exacerbating shortages. However, these effects will likely be temporary, as the economy adjusts to new circumstances.
- Growth forecast: Royal Bank of Canada’s deputy chief economist, Dawn Desjardins, forecasts growth of about 4.25 per cent next year, which she describes as "very strong."
- Consumer spending: With record savings built up and wages rising, consumers are primed to spend in the new year, allowing them to weather interest-rate hikes.
Overall, while Omicron may pose some challenges for the Canadian economy, Macklem believes that these effects will be short-lived, and the economy is well-positioned to handle the current situation.
