When the pandemic was declared in March 2020, and lockdowns were imposed across the major economies, there was high uncertainty about economic prospects and a policy priority to support household incomes and business viability through a period of turbulence. COVID came after years when policy globally had been fixated on an aggregate demand deficit, when central banks struggled to get inflation up to their target range, and when low borrowing costs pushed asset values higher and encouraged higher indebtedness of governments, businesses, and households.

The pandemic also struck as major economies confronted a diminishing social and political consensus over the tenets of sound economic policy, including growing doubts about an open trade and investment environment, as well as rising geopolitical tension. For an open, middle power like Canada, a slow growth, fragmented world was a difficult backdrop to transform the economy in response to population ageing, technological disruption, and climate change.

Over two years later, the economy has rebounded, but supply remains deficient and inflation has roared back. Moreover, the world is even more uncertain. By early this year, with a recovery well advanced, governments had largely pulled back their exceptional fiscal aids for households and businesses. Overall, advanced economies had solid momentum, held back principally by supply constraints. Prices in commodity markets were rising, labour markets were tightening, and global supply chains and infrastructure, in many cases still affected by COVID-related disruptions, were failing to keep pace with demand. In February, the unprovoked invasion of Ukraine by Russia, and the swift application of sanctions in response, exacerbated global economic tensions and uncertainty. Today, the world is less safe, Europe is a divided continent, conflict between the world's democracies and authoritarian regimes—in particular between the United States and China—is acute, COVID is persistent, and China's zero-COVID policy is forcing extended lockdowns. Meanwhile, global problems like climate change are still in search of collaborative solutions.

What will determine the course of the U.S. and Canadian economies over the next 24 months is the evolution of a set of structural and policy factors, each difficult to predict individually and each interacting with others in complex ways.

ReadSpring 2022 Economic Outlook: Planning in an Uncertain, Supply-Constrained World

Companion Papers

This Economic Outlook is issued jointly with companion papers authored by colleagues in thePublic Policy groupreviewing, respectively, geopolitics and geoeconomics, the labour market, commodity markets and the digitalization of money.

Geopolitics and Geoeconomics:Trade and Investment Disruptions and Implications

International trade and investment is a crucial channel through which economies and individual businesses specialize, innovate, become more productive, and grow incomes, output and employment while also containing input costs and inflationary pressures through competitive supply.

Today, several factors are combining to dim prospects for trade and investment, posing new challenges for the global and domestic economies and for businesses that have global reach and potential.

ReadGeopolitics and Geoeconomics:Trade and Investment Disruptions and Implications

Commodity Markets: Immediate and Longer-Term Perspectives for Canada

The invasion of Ukraine and sanctions against Russia have disrupted global energy and other commodity markets and exacerbated tensions in global supply chains. These and other effects of the war are pushing up inflation, dampening global growth, and raising risks of recession most acutely in Europe that is directly exposed to the conflict and that is highly dependent on Russia for its energy and other critical inputs.

In the current context, Canada is in a position not only to earn higher prices for its resources but to also to be part of the solution to the search by key partners of stable, secure, and responsible supply of energy, food, minerals, and forest products.

ReadCommodity Markets: Immediate and Longer-Term Perspectives for Canada

The Labour Market:Shortages, Uncertainty and Transitions

Supply shortages and economic uncertainty are underlying themes in thisSpring 2022 Economic Outlookin addition to resonatingin analyzing developments and prospects in the Canadian labour market more than two years after the outbreak of COVID. Jobs recovery in Canada since the COVID lockdowns has been strong; however, a shortage of workers is now being felt across wide ranges of occupations and income levels.

Balancing labour supply and demand in a changing and uncertain world can be expected to continue to represent a foremost challenge for Canada's longterm prosperity.

ReadThe Labour Market:Shortages, Uncertainty and Transitions

Deciding on a Digital Dollar: The Necessary Steps for Canada

On April 26, 2022, theCentre for International Governance Innovationand Bennett Jones LLP hosted a virtual workshop with international and Canadian experts, from the public and private sectors as well as academia, on the steps required for Canada to keep pace with global developments in the digitalization of money. This conference report shares key takeaways from the workshop, which was held under Chatham House rules.

ReadDeciding on a Digital Dollar: The Necessary Steps for Canada