Statistics Canada says the economy grew 4.6% last year, compared with a decline of 5.2% in 2020, the first year of the Covid-19 pandemic.

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

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.

Output was flat at the end of the year as Statistics Canada said real GDP was essentially unchanged in December.

That left the Canadian economy 0.4% above pre-pandemic levels recorded in February 2020.

The agency also said in an early estimate that the Canadian economy grew by 0.2% in January.

The January figure came as a bit of surprise for economists who expected a pullback amid the omicron wave that led to a loss of 200,000 jobs in the month.

Omicron’s impact on the economy “appears to have been more muted than expected,” said RBC senior economist Nathan Janzen in a research note.

Royce Mendes, managing director and head of macro strategy at Desjardins, said the economy likely built on January 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 came 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.

“Geopolitical tensions have increased, but we still expect the Bank of Canada to hike rates with domestic economic conditions looking substantially stronger and inflation running above-target,” Janzen said.

CIBC senior economist Andrew Grantham also said in a research note Tuesday that the strong end to 2021 means growth for this year will be stronger than expected, providing further justification “for a series of rate hikes from the Bank of Canada, starting tomorrow.”

However, the war in Ukraine combined with lower disposable income as government supports wane may lead to slightly slower growth in the middle quarters of this year, he said.