Economic Outlook 2022: Navigating a Complex Recovery

May 3, 2022

Going into 2022, economists and financial leaders knew that the economic recovery from the COVID-19 pandemic would have numerous challenges. The last two years have seen radical shifts in consumer spending, cracks in global supply chains causing disruptions in every market, and skyrocketing housing prices. If those issues weren’t enough, the world is now dealing with the fallout from economic sanctions on Russia and a return to COVID lockdowns in China.

How to address these challenges was the topic of this year’s Economic Outlook presentation hosted by the Lazaridis School of Business and Economics and the Laurier Centre for Economic Research & Policy Analysis (LCERPA) at Wilfrid Laurier University.

The long-running series brings leading economists to the Laurier community to share insights on challenges and opportunities in Canada and across international markets. This year’s event was a virtual panel discussion with Frances Donald, global chief economist and strategist at Manulife Investment Management and Millan Mulraine, director and chief economist at the Ontario Teachers’ Pension Plan. The panel was moderated by Brian McCaig, associate professor in the Department of Economics and director of LCERPA.

Deborah MacLatchy, president and vice-chancellor of Wilfrid Laurier University opened the event and recognized it as being in the spirit of the university’s mission to be a place of inquiry and discourse by reaching out and engaging the community.

This year’s event was sponsored by Conestoga Meats, Co-operators, and the Wilfrid Laurier University Alumni Association (WLUAA). WLUAA President Ryan Smith (BBA ’98) said their organization is proud to sponsor the event.

“Laurier continues to do a great job of bringing together many of the brightest economic minds in Canada to present their view on the future trajectory of the Canadian economy,” Smith said.

As moderator, McCaig opened the panel discussion with a question on the impact of rising inflation across multiple global economies, including Canada and the U.S. While inflation is a worldwide issue, Donald said that Canada’s inflation rate is slightly lower than many of the world’s economies.

“The fact that inflation is global and happening to every major economy across the world, particularly in developed markets, is an important component of this because it tells us that it’s not really what we as Canadians did, but what was happening on a global basis,” she said.

Donald called the inflation over the last two years ‘COVID inflation’, and it’s been driven by the shift in spending with consumers purchasing new vehicles or doing major home renovations rather than spending at restaurants or on travel. Pre-COVID spending is starting to return, which Donald said should have seen a reduction in inflation—if that was all that was happening.

“The challenge is that we’re now moving from ‘COVID inflation’ to ‘conflict inflation’. The things that were driving inflation before now, like cars and kitchen renos, are things that you didn’t necessarily need to buy. If it was too expensive for you, you could go without. But as Russia invades Ukraine, we’re moving towards a more difficult type of inflation. We’re moving towards energy and food price inflation. No matter who you are, it’s really hard to substitute away from energy and food-price inflation,” Donald said. 

Mulraine echoed Donald’s thoughts and added that he sees the potential for a period of stagflation, the combination of high inflation, high unemployment, and slow economic growth that was a hallmark of the 1970s.

“I do think that globally, and potentially in Canada, we’re moving into a stagflation environment and this makes it very difficult for policymakers. In an environment where we have growth momentum slowing and inflation remaining stubbornly high. So what’s the central bank to do? Well, we’ll find out,” Mulraine said.

On the topic of economic response and policy change to the invasion of Ukraine, McCaig asked the panelists what the impact on international and Canadian markets will be over the long term. Mulraine said that we’ll continue to see higher energy prices, but he added there is a positive element to the sanctions for Canada.

“A lot of the commodities that Russia produces, and that will likely be sanctioned, are also produced by Canada. That means, from a domestic point of view, there is a potential for Canada to benefit from the fallout from the Russian sanctions,” Mulraine said.

No conversation on the economic recovery would be complete without talking about China and its impact on the global supply chain. China’s importance in global supply chains came into sharp focus early in the pandemic. As new variants and waves of the pandemic emerge across the globe, China’s zero-COVID policies continue to impact the supply chain.

Donald said that China’s response stands in stark contrast to the U.S. and Canada.

“China has now gone into one of its sharpest lockdowns since the start of COVID because they’re still pursuing COVID-zero policies, even as Canada, the United States, and Europe are letting up on their regulations, restrictions, and health precautions. This major economy that’s at the center of global manufacturing is actually moving in the opposite direction,” Donald said.

Mulraine said that there is a lot to unpack and explore in how China interacts with the west.

“This goes for economists, policymakers, and even students. In a few years’ time you’ll be living in a world where it might be vastly different from the world that your parents grew up in,” Mulriane added.

The discussion ended with a conversation about how economics has helped the panelists with their career paths and day-to-day work.

Mulraine said that every day makes him feel like a kid in a candy shop.

“There’s so much excitement in terms of what’s going on in the world and how, as an economist, I can have a frame of reference for people to understand the risks associated with each decision,” Mulraine said.

Donald said that she has loved economics since her first class. She said economics gave her a framework to view the world. Donald has even spoken about her love of economics in a TED talk on how everyone is an economist at heart.

“Economics is a delightful education that can take you in so many different directions. There are so many different types of economists in this country. You can work for policy, you can work on risk, you can work for consultants, you can work for individual companies. You can make the lives of Canadians better by working for the Bank of Canada, working on climate change, working for the government. There’s so much that you could do and I think it’s just a wonderful education that carries you throughout your entire life.”

The Lazaridis School would like to thank Frances Donald and Millan Mulraine for their participation in Economic Outlook 2022 as well as Co-operators, Conestoga Meats, and the Wilfrid Laurier University Alumni Association for their generous support of this event.

Learn more about the exciting opportunities to study economics at the Lazaridis School at the undergraduate or graduate level.