By Julie Gordon

OTTAWA, (Reuters) – Floods in British Columbia that destroyed bridges and roads will have a negative impact on Canada’s economy and increase inflation. However, the timing of the Bank of Canada rate-hike is expected to stay the same, according economists.

Doug Porter, Chief Economist at BMO Capital Market Economics, stated that “We are still trying to understand this complicated situation and are waiting to see how long-lasting these blockages are.”

Porter reduced his 4Q growth estimates by half to 3.0% (compared to 3.0% a year prior). This decreases Porter’s overall growth outlook for the year to 4.8%. He had previously forecast 5.0% owing to global supply chain disruptions and floods.

He said, “It’s not clear for the Bank of Canada that the weaker growth numbers will have any impact since they have hit supply and threaten to increase inflation even more.”

While economists agree that flooding is likely to have an impact on short-term forecasts of gross domestic product, there are still significant uncertainties about whether growth will rebound.

It will take time to fully repair the infrastructure needed to transport goods https://www.reuters.com/markets/commodities/alcohol-auto-parts-canadas-warehouses-fill-up-floods-stop-flow-goods-2021-11-23 across the mountainous Pacific coast province, but key rail lines are set to reopen this week.

Jimmy Jean (chief economist at Desjardins Group), stated in a note that “Quantifying economic impact while the situation is still changing is fraught with uncertainty.”

Jean claimed that in 2013, floods in Alberta hampered growth, but it quickly rebounded.

Jean explained that it is quite typical for natural disasters to lead to a quick economic recovery.

The Bank of Canada last month – before the floods – cut its growth forecasts and signaled rate hikes https://www.reuters.com/world/americas/bank-canada-signals-it-could-hike-rates-sooner-than-expected-2021-10-27 could start in the “middle quarters” of 2022.

Inflation would rise this year, the central bank said. The target of 2% in 2022 will be met if inflation does not fall below that level. Canada’s annual inflation rate hit 4.7% in October https://www.reuters.com/world/americas/canadas-annual-inflation-rate-hits-47-oct-highest-since-feb-2003-2021-11-17, the seventh straight month above the central bank’s 1-3% control range.

Simon Harvey from Monex Canada, senior FX market analyst, stated that “the inflationary shock (for the central bank) will be more pressing concern and will keep them in track.”

According to the money markets, the Bank of Canada will begin raising rates in March 2022. There would be five more increases. Stephen Brown of Capital Economics was skeptical.

The flooding in B.C. has caused a severe impact on the activity. Brown stated in a note that this week lowers the chances of the Bank becoming more hawkish anytime soon.