Outlook for Canada's Economy and Technology Markets in 2022

Ongoing health restrictions and rising vaccination rates along with supportive fiscal and monetary policies are contributing to Canada’s economic recovery and are having a positive derivative effect on the information and communications technology sector. Overall, in 2022 we expect to see strong economic growth with real GDP rate at 4.1 percent, and 3-4 percent in 2023, compared to 5 percent in 2021. In a positive move, the Bank of Canada tapered and ended its quantitative easing program, a clear sign that Canada’s economy is well on its path to recovery. On the exports front, we’ve seen a rebound as the United States shows signs of a more revived economy, which is all good news for Canada with the United States constituting nearly 74 percent of Canada’s total export. And while all of this is positive, markets are still concerned with some of the major challenges of 2022, supply chain disruptions, energy constraints, and new COVID-19 variants.

According to Tiff Macklem, the Governor of the Bank of Canada, the inflation rate is transitory, but will not be short-lived. And the latest data shows the current inflation rate in Canada at 4.7 percent, but it will most likely increase to 5 percent by early 2022, and then ease back to 2-3 percent by late 2022. Key factors driving inflation are supply chain-related bottlenecks and higher energy prices. The central Bank generally increases the interest rates to lower down inflation. However, to support the economic revival, the interest rate is predicted to remain low until a 2 percent inflation rate is achieved. For the labor sector, around 154,000 jobs were added in November, and the unemployment rate declined to 6 percent which is nearly equal to the 2019 rate of 5.5 percent. This is a positive indication of economic recovery from the recession.

The pandemic has accelerated long-term digital transformation initiatives to be completed in months, rather than years. We now see businesses rapidly adopting digital channels for customer interactions and embracing the use of advanced technologies in business decision-making. In 2022, IDC expects the Canadian Information and Communications Technology sector to grow at a 4 percent rate (similar to the estimated overall Real GDP growth rate of 4.1 percent). Technology segments such as cloud services, next-generation security, AI, Robotics, and AR/VR will be the major drivers for the overall ICT growth in the next one to two years.

Here’s a brief look at some of the technology and data trends we expect for 2022:

• Personal Computing Devices: The pandemic has forced the knowledge-based industries to restructure how they work, driving up the sales of personal computing devices such as laptops and tablets as everything-from-home (everything includes work, schooling, shopping, etc) has become the norm. However, supply chain disruptions will hamper the sales of personal computing devices in 2022.
• Infrastructure as a Service (IaaS): The IaaS will grow above 10% driven by increased demand for compute and storage requirements.
• Communications Market: The 5G network deployment across Canada will continue and mobile data will remain the major segment of revenue for Canadian telecom operators in 2022.   
• Drone Sector: Drone use cases in Canada witnessed one of the fastest growth rates in 2021. The drone technology in Canada has already taken off and regulations are moving forward swiftly. It is worth 350 million dollars and Enterprise drone spend will surpass the Consumer drone spend in 2022, according to IDC’s Worldwide Digital Transformation Spending Guide 2021.                                                                                            
• Innovation Wave: If we take a cue from history, we can infer that crisis usually brings along a wave of innovation. For example, the printing press invention was the result of a shortage of workers after the bubonic plague in Europe in the fourteenth century. Similarly, today Canadian organizations are adopting automation to keep infection rates and operational costs low. A good example is Dark Horse Espresso’s automated espresso bar, offering Canada’s first robotic cafe, and contactless experience.
• Cyber Security will remain an imperative area of investment for both government and businesses across Canada. The ransomware attack on Newfoundland and Labrador healthcare system and the data breach at Ottawa’s French-language public school board showed how cyber-attacks can have a real impact on the lives and safety of people.
• Artificial Intelligence will remain an important technology investment area in 2022. As organizations move from products to platform-based business models, it requires redesigning and developing new use cases, and AI will be an integral part of this transformation. Few of the prominent AI-embedded use cases which saw a surge in investments are automated customer service agents, digital assistants, fraud analysis, and investigation. According to IDC’s Worldwide AI Spending guide 2021, the cumulative spend on AI use cases in Canada will be over 11 billion dollars from 2022 to 2025.