The Canadian economy is heading for a “mild recession” at the start of next year, Desjardins economists anticipate, as a result of the rise in interest rates to curb inflation and the increasing “signs of a slowdown” in the global economy and in the United States.
Posted at 5:06 p.m.
In their outlook update, released Thursday, Desjardins economists now expect real GDP growth of just 0.3% next year for the Canadian economy.
If it turns out, it would be a marked slowdown close to stagnation after a year 2022 forecast at around 3.4% in annualized growth
The Canadian economy is not immune to global trends. Real GDP growth in several countries has already been revised downwards for 2022 and especially for 2023. This particularly affects the United States, where real GDP has already experienced two consecutive quarters of decline, and certain countries in the euro zone where the consequences of the war in Ukraine and the rise in prices are being felt hard.
Excerpt from the Desjardins economists’ outlook update
Meanwhile, Desjardins economists point out, the major central banks, including the Bank of Canada, “raised interest rates aggressively in an effort to control inflation. Interest rate sensitive sectors are particularly affected, notably the housing market. »
As a result, they predict, “a mild recession is now forecast for the Canadian economy in early 2023. Real GDP growth is expected to slow and contract in the first two quarters of 2023.”
On the positive side, “this downturn in economic activity should be short-lived, given the very favorable starting point in the labor market and the likelihood that the Bank of Canada will begin to cut interest rates in the second half of the year. of 2023.”
And in Quebec?
“After an excellent start to the year, the signs of the Quebec economy’s economy are running out of steam are mounting,” note the Desjardins economists.
However, “Quebec should do quite well compared to the other large provinces because of certain favorable factors. »
Thus, Desjardins economists anticipate real GDP growth in Quebec to slow to 0.5% in 2023, after 3.7% for the whole of 2022.
By comparison, in Ontario, real GDP growth is now forecast at only 0.1% in 2023, a marked slowdown after a year 2022 of around 3.4% in the final account.
What are these favorable elements in Quebec compared to the other provinces?
First, according to Desjardins economists, “the labor market in Quebec is among the tightest in Canada, thus favoring stronger wage growth. In addition, employers may have an incentive to retain as many employees as possible if they expect only a short period of economic weakness. »
Second, “Quebec’s savings rate is the highest in Canada, which gives households plenty of leeway to absorb the increase in the cost of living and interest rates. »
Finally, “housing affordability in Quebec has deteriorated less than elsewhere, and the real estate market correction should therefore be less abrupt than in Ontario and British Columbia. »
Highlights of Desjardins’ economic forecasts (annual averages)
Real GDP Growth
- in Quebec: 0.5% in 2023 after 3.7% in 2022
- in Canada: 0.3% in 2023 after 3.4% in 2022
- in Ontario: 0.1% in 2023 after 3.2% in 2022
- in the United States: 0.4% in 2023 after 1.6% in 2022
Employment growth
- in Quebec: 0.6% in 2023 after 2.6% in 2022
- in Canada: 0.7% in 2023 after 3.7% in 2022
- in Ontario: 0.6% in 2023 after 4.6% in 2022
- in the United States: 0.8% in 2023 after 4.1% in 2022
Unemployment rate
- in Quebec: 5.2% in 2023 after 4.4% in 2022
- in Canada: 6.2% in 2023 after 5.3% in 2022
- in Ontario: 6.7% in 2023 after 5.6% in 2022
- in the United States: 4.5% in 2023 after 3.6% in 2022
Source: Economic Studies Department, Desjardins