2 minute read time
June 3, 2020

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Across Canada, there are encouraging signs that containment measures have bent the curve of COVID-19’s spread.

Province by province, economies are gradually reopening, and our focus is shifting towards economic recovery and what the Bank of Canada has called “unknowable times.”

CIBC Capital Markets Deputy Chief Economist Benjamin Tal said in CBRE’s recent Virtual Market Outlook, that the country may also experience what he calls a “zig-zag economy,” with starts and stops as the economy partially reopens, only to temporarily close again.

While there is no playbook for restarting a frozen economy, there are trends and developments worth considering as we enter this new stage of the COVID-19 pandemic.

Monetary Stimulus Likely to Continue

The Bank of Canada isn’t certain of many things, but it will say this: significant stimulus will be needed to rebuild the economy.

Normally, the unprecedented levels of stimulus currently being provided by governments and central banks would be considered unsustainable due to inflation concerns.

But the pandemic is deflationory in nature which, combined with high levels of debt, is what has led to economic depressions in the past.

That should justify the continuation of monetary stimulus and historically low interest rates.

Lenders Looking Ahead

Lenders across the country are setting aside record levels of provisions for loan losses, including a record $10.9 billion by the Big 6 Canadian banks, in anticipation of arrears and defaults for loans and mortgages in the coming months.

Lenders are also looking ahead and have begun to show an interest in considering investment opportunities again as COVID-19 restrictions begin to loosen.

Commercial real estate borrowers will find willing lenders but should expect greater scrutiny than in the recent past.

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