The transition to the new steady state, however, as lenders deleverage and protect themselves against various downside risks, involves some overshooting – making terms and standards tighter than will be necessary over the long run. This story is completely consistent with the one told in the Hatzius paper, which relies mostly on quantity relationships to gauge the possible effects on gross domestic product (GDP).
In the non-energy sector, we make the aggressive assumption that construction activity will finally begin to recover, based on the implementation of certain public sector projects – the highway to Point Fortin, the HDC housing repair programme, the three mega sport facilities announced in the budget and some smaller construction projects, for which contracts are expected to be awarded soon.