If what’s past is prologue, growth will be lower and unemployment higher for years to come. The Bank of Canada forecasts that, as a result of the crisis, cumulative foregone economic output from 2009 to 2012 will be 16 per cent of GDP in Europe and 9 per cent of GDP in Canada (see Appendix, Chart 1).
Over the longer term, we estimate that these shortfalls could grow to about 40 per cent and 30 per cent of respective GDP. Given the synchronous nature of this global crisis, there are reasons to fear such severe outcomes.