Some economic activity and employment would return to normal levels as soon as the pandemic subsided and lockdowns were lifted—similar to what often happens following a natural disaster. Other economic activity would take longer to come back. Indeed, in the spring of 2020 economists around the world debated about whether the recovery would be V-shaped or L-shaped.
When Paul and I appeared before this Committee last April, we told you that the economy was judged to be operating significantly below its potential. That is no longer the case, because the Canadian economy has grown faster than was projected in last April’s Monetary Policy Report and the July Update. This stronger growth was largely due to a surge in exports.