Is Canada going into Recession this Year?
The majority of Canadian provinces will enter a recession in 2023, but Ontario will be among the hardest hit.
According to a Deloitte report, the Canadian economy will slow this year due to inflation and monetary tightening to control price growth.
“The good news is that we are increasingly confident that peak price growth is behind us, with inflation decelerating steadily since hitting 8.1 per cent in June 2022. “We expect price growth to slow further, with moderation already evident in gasoline and food prices, as well as homeowner replacement costs, in tandem with falling housing prices,” the report stated.
Furthermore, because the labour market remains tight, this recession is not expected to be accompanied by a drop in overall employment.
Nonetheless, a “deeper” recession is expected across the country this year, with only Manitoba and Saskatchewan experiencing positive growth as a result of the agricultural industries’ recovery after drought conditions severely reduced output in 2021. In 2021, Ontario’s real GDP growth rate was 5.1 percent. It slowed significantly to 2.4% in 2022. Looking ahead, it is expected to be -1.3 percent in 2023. The same can be said for British Columbia and Quebec. The BC economy is expected to recover in 2024, with real GDP growth of 1.9 percent.
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Furthermore, because the labour market remains tight, this recession is not expected to end soon. According to the report, the impact of the housing market downturn will be more pronounced in central Canada and British Columbia because Ontario and British Columbia have the most expensive housing markets and, as a result, the highest debt burdens. Quebec and Ontario are also very vulnerable to US conditions, so the “downturn south of the border will negatively affect export prospects,” dragging down growth in both provinces.
Because of the scarcity of labour on the other side of the predicted recession, job losses are expected to remain low, with the majority of losses in sectors such as construction, information, culture, and recreation.
“This is shaping up to be another rocky year for the Canadian economy,” according to Deloitte researchers. “But we’re getting used to summoning our fortitude and acting swiftly to position ourselves to weather the economic storm — the impending recession is just the latest wave.”
To learn more, read the full Deloitte report.
