Thanks very much for organizing this and giving us a chance to speak.
I suspect you're going to hear a lot of overlap between what I say and the others, so I'll try to keep it brief in the hope that I won't steal too many people's thunder.
As I think you all know, we are dealing with an economic contraction of historic proportions. There is no other way to characterize it. COVID is leading to essentially as close as we're ever going to get in economic terms to a sudden stop in economic activity. The government—you guys—has basically switched the off-switch on a range of sectors and that obviously comes at a significant economic cost.
The good thing is that, despite the very significant contraction that we're seeing, the containment efforts—the harm that's been caused—seem to have been working in the sense that the virus is beginning to be under control. We've flattened the curve. That is allowing provinces, and it's allowing other countries as well, to start reopening their economies.
As we think about the year, for instance, it's very important to think about it in two halves: the first part of the year as a tremendously damaging economic scenario, and the second part of the year, obviously, as a very significant rebound as we reopen. We're seeing evidence that the reopening is coming with very significant rates of acceleration in certain sectors. We're seeing that in auto sales. We're seeing that in the housing market. In the U.S., we're seeing that in the retail sales activity reports, which came out. We've seen that in the labour market.
These are all indications that the economy is on the path to normalizing as we reopen, but it shouldn't be read or interpreted as the economy going back to where it was. The reality is that when you go from very, very low rates of economic activity to something that's a little bit higher, you're going to get a very strong growth rate, but it still means you're very far away from where you were.
As we think about it, for instance, in our forecast, we have a pretty significant decline in growth this year, about minus 7%. We think it's going to take about a couple of years to go back to where we were at the end of 2019. The depth of the hole that we are currently in takes a long time to unwind, even with very strong growth rates. That's under the assumption that the virus remains under control, there is no second wave, there is no reactivation, there are no further shutdowns and there is no additional shock that hits us. This is, in a sense, the best-case scenario.
One can debate how quickly we rebound—and others have different views on that—but that's generally how we see things.
It's important to keep that in mind because there is a very significant distinction between growth rates and levels, and in this context, that really matters. If you go back to a normal recession, a normal historical economic shock where you'd lose 2% or 3% of economic activity, those used to be big, big shocks. Now we're talking about a scenario where you lose 7% or 8% and it takes you a long time. This time next year you're still down 2% or 3% relative to where you used to be, so it's just this tremendously powerful economic drag.
Of course there has been a tremendous number of policy responses on the federal side and the provincial side. Generally I think they've been managed reasonably well. It was clearly an environment where nobody was going to let perfection be the enemy of the good, and I congratulate governments for doing that. Of course, things could have been done better, but you know that after the fact to some extent.
The result is a very significant increase in deficits—an unbelievable increase in deficits—which we think is largely warranted and we're not particularly worried about because we're starting from a reasonably good fiscal perspective.
That doesn't mean to say it is going to remain the case. If the virus comes back in the fall and we have to throw some more money at it, then at some point you start to really worry about the fiscal dynamics, but at present I think the starting point was good, we acted in roughly the right dimension and we're on a track for sustained recovery if the virus remains reasonably well contained.