The Parliamentary Budget Officer (PBO) forecasts a sharp slowdown in Canada’s real gross domestic product (GDP) growth during the second half of 2022, and “low growth” throughout 2023, as the Bank of Canada continues to raise interest rates.
In its most recent economic and financial outlook, Yves Giroux’s office expects the Bank of Canada to raise its key rate to 4% by the end of the year, before reducing it at the end of 2023, following a slowdown in inflation.
The Parliamentary Budget Officer also estimates that the federal deficit will shrink to $25.8 billion, or 0.9% of GDP, for the 2022-23 fiscal year.
The deficit was $97 billion, or 3.9% of GDP, in the previous fiscal year.
Assuming no new measures are introduced and the current temporary measures end as scheduled, PBO estimates the deficit will decline further thereafter, to $3.1 billion, or 0.1% of GDP, by 2027-2028.
PBO also projects that the federal debt-to-GDP ratio will decline from its 2020-21 peak, gradually returning to 36.2% in 2027-28, but will remain higher than before. the pandemic.
“After a solid performance during the first half of the year [2022] and in light of monetary policy tightening, we expect Canada’s GDP growth to slow significantly in the second half of 2022 as consumers spend less, housing investment continues to decline, and businesses invest less in inventory.” , summarizes the PBO.
“We expect real GDP growth to remain weak through 2023, before rebounding sometime in 2024.”