BoC: Digital adoption means less damage to economic potential

Deputy Governor Timothy Lane says adopting technology has bolstered Canada’s resilience during the pandemic

BoC: Digital adoption means less damage to economic potential
Steve Randall

Digital transformation has been hailed as a key factor in Canada’s resilience during the pandemic.

Bank of Canada deputy governor Timothy Lane says that adopting technology meant that Canada “managed to avoid more serious negative shocks to the economy” thanks to the ability of individuals and organizations to adopt remote working, online shopping, and contactless restaurant deliveries.

He added that the acceleration of digital transformation should mean positive effects on productivity and growth potential for years to come.

“There is no doubt the recession caused by the pandemic, like all recessions, will result in lost capacity and scarring [the result of long-term unemployment which reduces re-entry to the workforce and overall productivity],” Lane said. “But the accelerated digital transformation has supported resilience so much that we now think the damage to potential will be less than we earlier feared.”

The deputy governor also noted that the economy is starting to bounce back including increased consumer spending and rising prices for oil and other commodities.

Jobs and inflation

However, he also acknowledged that the pandemic has meant weaker employment numbers this spring but, while some roles will be replaced by technology, the shift to digital is challenging companies who cannot find enough workers with the skills required.

Addressing one of the big concerns both in Canada and worldwide, inflation, he said that it is more complicated than usual.

The current 3.5% is a higher inflation rate than the BoC is targeting (2%) but Lane explained that the year-over-year rate compared prices now with one year ago, when the pandemic had caused prices – especially of commodities – to plummet.