(Toronto) Canada is heading for a recession in 2023, but it’s likely to be short-lived and not cause as much damage as past downturns, a new Royal Bank report says.
Posted at 11:12 a.m.
Bank economists say soaring food and energy prices, rising interest rates and continuing labor shortages will push the economy into a ‘moderate contraction’ next year .
Royal Bank says it expects the unemployment rate to hit 6.6% next year, but doesn’t think it will take long to reverse some of that weakness from 2024.
Household spending that accelerated as the COVID-19 pandemic-related lockdowns ended will slow as rising prices, interest rates and unemployment hit households, the report adds.
The Royal also expects house prices to fall by 10% over the coming year, which will subtract more than $800 billion from household net worth.
The bank says a three-quarters percentage point hike in interest rates is likely next week, and sees the Bank of Canada pushing its benchmark rate to 3.25% by the end of this year. The central bank raised its policy rate by half a percentage point to 1.50% in June, in a bid to rein in soaring inflation.