Statistics Canada said Tuesday the economy grew 4.6 per cent last year, compared with a decline of 5.2 per cent in 2020, the first year of the COVID-19 pandemic.

Growth in the fourth quarter came in at an annualized rate of 6.7 per cent.

Statistics Canada said the largest contributor to economic growth last year was household spending and residential construction as new home construction, resales and renovations increased at near-record levels.

The increase of 15.4 per cent for the year was second only to the 17.4 per cent gain recorded in 1983 as the country came out of a recession the previous year.

Omicron wave that led to a loss of 200,000 jobs in the month.

Royce Mendes, managing director and head of macro strategy at Desjardins, said the economy likely built on that momentum in February as the country turned a corner on the latest wave of the pandemic, which allowed for businesses to reopen across the country.

The figures come a day before the Bank of Canada's next scheduled interest rate announcement. The central bank is widely expected to raise its key policy rate on Wednesday in the first of what is expected to be several hikes higher this year.

They also landed the same day as parliamentary budget officer Yves Giroux released his updated outlook on the Canadian economy and federal finances.

Giroux's report released Tuesday said the economy, after a weak start to 2022, should grow 3.9 per cent this year, driven by a sharp rebound starting in the second quarter.

He also foresees a budget deficit this fiscal year of $139.8 billion, and $47.9 billion in the next fiscal year which starts in April — both figures being better than the government projected in its financial update in December.

But Giroux warns that rosier financial picture for federal books, aided by a better-than-expected economy, could easily sour.

Giroux said outstanding Liberal election promises amount to $48.5 billion in new spending. If much of that shows up in this year's budget, Giroux says debt and deficits would rise.

This report by The Canadian Press was first published Mar. 1, 2022.