Thank you. All's well that ends well.
Good afternoon, Mr. Chair and committee members. Thank you for the invitation and the opportunity to speak with you today.
I'll keep my remarks relatively brief because I largely agree with those who spoke on the economic outlook earlier.
Canada has just experienced the deepest and sharpest economic downturn in the post-war era. However, it also now looks to have been the shortest recession ever, as there are plenty of signs that activity, jobs and spending began to recover in May alongside the initial stages of the reopening in many parts of the country and throughout the rest of the world.
While some of the latest economic indicators are no doubt encouraging, there is also little doubt that we're climbing out of a deep valley. Preliminary evidence from Statistics Canada, as earlier mentioned, suggests that the economy fell by 17% in March and April alone, and that may well be revised even higher to a deeper decline. Again, to put that in context, the previous largest decline was in the early-1980s recession when OPEC fell by just a little bit more than 5% over one and a half years.
As economies reopen, we think that a large share of this drop can be reversed relatively quickly. However, it's also apparent that, in the absence of an effective vaccine, certain sectors will remain heavily constrained for an extended period of time, likely constraining the overall economy. Crucially, most of these sectors that will remain constrained do tend to have above-average employment levels. If anything, the employment effect of the constrained sectors will be even more than what the overall GDP numbers suggest.
Even though we currently project this rebound and activity next year after, we believe, a similar decline this year, that would still leave the economy 3% to 4% below where it normally would have been by the end of next year, and the unemployment rate is likely to be two to three percentage points higher than the pre-crisis levels, even by the end of 2021.
Moreover, the economy does face an important challenge: transitioning from the initial reopening phase to the recovery phase. Even as the need for the most extreme policy measures fades, the economy will require, as mentioned earlier, support for a longer period of time. Policy will need to strike the appropriate balance between supporting incomes and not discouraging work incentives.
While we recognize that it is still a highly uncertain environment, the upcoming fiscal snapshot is welcome, as it will help to give us all a firm foundation for future decisions.
Looking further out over the medium term, we are relatively upbeat on the prospects for the recovery. Individuals and businesses are incredibly resourceful, as we have seen in recent months, and they can learn to deal with challenging circumstances. We don't think that we should discount the ability of the economy to recover.
With that, I'll turn it back to you, Mr. Chair. Thank you.