TORONTO – The head of the Royal Bank of Canada is warning the economic recovery from the COVID-19 pandemic will likely be slower and more uneven than originally thought.
CEO Dave McKay said Wednesday that the depths of the challenge are becoming more clear and that governments and institutions are going to have to plan longer term.
“We’re going to need to support businesses and consumers a little bit longer than we might have planned even a month ago, where, you know, most people were talking about a sharp V, or a U at a minimum with a sharp upside. I don’t think you can expect that,” he said.
Speaking at a media roundtable Wednesday after the bank’s annual meeting, McKay said the economy will have to restart in stages to avoid recontagion, while business spending will also be more cautious.
“If everybody’s going to be a little more conservative, keep a little bit more cash, put a little bit less risk on the table, then by de facto, that alone will slow the recovery curve. So all of these factors absolutely play into why I foresee this being a slower recovery.”
He said that some areas of the economy could see especially protracted recoveries, such as business travel as companies adapt to ways of doing business remotely, but that ideally much of the economy could be operating again by early next year.
“If we can get back to 80 per cent of or 90 per cent of where we were, you know, early in 2021, I think that is pretty good. But it might take a while to the fall to get back.”
The economic hit comes as Canadians are carrying record levels of debt, but McKay said that the combination of income supplements from the government combined with payment deferrals from banks should combine to help bridge a huge part of the population.
RBC alone has so far processed over 250,000 payment deferrals, including mortgages and other lines of credit, he said.
Despite the deferrals, McKay said at the annual meeting that the bank was well positioned to ride out the pullback in the economy and has no plans to cut its dividend.
He said governments will have to think about saving some stimulus options to spur a recovery for when the outbreak gets under control and to instill enough confidence in consumers to spend.