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Canada has one of the leading vaccination rates in the world, but its relatively low hospital capacity means less tolerance for serious Covid-19 infections — a fact that may weigh on the economic recovery, cautions CIBC World Markets.

In a new report, economists say that Canada ranks below most OECD countries in terms of health-care capacity, which means that the “threshold to ignite restrictive policies is low” and the fourth wave of the virus represents a near-term risk to the economy.

“The good news is that vaccinations have clearly altered the relationship between cases, hospitalizations and ultimately deaths,” the report said. “The bad news is that the Delta variant is having a bigger impact on younger age groups, who either can’t be vaccinated or are less likely to have taken up the vaccine.”

According to the report, while the number of infections being recorded in Canada now is similar to the second wave, the fatality rate is about 60% lower. However, the hospitalization rate is only about 15% lower than in the second wave.

“More recoverable cases appear to be reaching the hospitals, making hospital capacity just as or arguably even more important than in prior waves, and still, something that will govern public health restrictions,” it said.

Reintroduced restrictions translate to weaker economic growth.

“Our base case forecast for a continued, albeit slower, economic recovery over the winter months assumes that restrictions on service industries don’t go any further than the vaccine passport systems already announced. However, there is clearly downside risk to that forecast,” the report said.

Longer term, the report suggested that the pandemic may drive increased health-care investment.

“Covid-19 may be the wake-up call we need to increase investment in health-care infrastructure. Any improvement here will help not only to alleviate the pressure on an overextended system, but also will carry a notable economic dividend for the future,” it said.