Don’t expect Ontario’s economy to come back to pre-pandemic levels much before the middle of 2022.

The overall message in the latest economic analysis performed by financial services provider Central 1 was that the initial burst in restart activity seen in the summer won’t be sustained. Rather, the economy will continue to grow at a muted rate through the end of this year and likely all of next.

“Annual real gross domestic product (GDP) is forecast to decline 6.0 percent in 2020, followed by growth of 4.4 percent in 2021,” says Central 1 Regional Economist Edgard Navarrete. “Economic output is not expected to return to 2019 levels until mid to late 2022 with real GDP forecast to grow by 2.7 percent in 2022 and 1.8 percent in 2023.”

According to Central 1, annual average employment growth will recoil 5.2 percent contributing to an unemployment rate which will settle at 9.8 percent. Navarrete suggests the Ontario economy will be impacted not only by significant labour market uncertainty, but also by continued public health policies, travel restrictions, and the absence of a widely available vaccine.

“We anticipate an effective vaccine to be made available by early 2021, but deployment lags will mean a slow road back for the economy,” says Navarrete. “Current public health directives such as mask wearing, physical distancing, and controls on congregation sizes could possibly continue for most of 2021 and points to ongoing struggles for businesses and the likelihood of more permanent closures.”

The accommodation and food services sector has been hard hit. The sector’s contribution to real GDP is forecast to fall 27.7 percent in 2020. Navarrete suggests pre-pandemic output in this sector is not expected to return until mid-decade, around the time many experts are calling for air travel to recover.

Retail sales will see significantly lower revenues in 2020 as consumers remain skittish. Navarrete said that greater use of e-commerce will support some revenue growth in this sector but not enough to offset less foot traffic at shops.

Not all services-sectors will fare poorly in 2020. “Those able to pivot to online or towards remote work to protect their employees such as professional and scientific services, finance and health will continue to remain relatively unscathed and face shallower losses,” says Navarrete. “However in 2020, growth will remain modest as businesses will be very cautious regarding expansion plans.”

New home construction, a lagging indicator, is expected to rise 17.1 percent in 2020 to 80,800 units reflecting pre-pandemic demand and sales.

“Post 2020, new home construction will range between 73,200 units and 74,400 units from 2021 to 2023 below the 2017 to 2019 average of 75,600 units on lower population and household formation growth and big-ticket household spending,” says Navarrete.