Next year will see Canadians pull back spending and experience job losses as the economy copes with with rising interest rates and inflation, RBC economists project in a new report
The Canadian economy will slip into a “moderate and short-lived” recession in 2023 as it copes with rising interest rates and lofty inflation, Royal Bank of Canada warned on Thursday.
Canadians will also be affected by job losses, sending the national unemployment rate – now at a record low of 5.1 per cent – to around 6.6 per cent, the bank estimates. As monetary policy tightens, global investors are betting that it results in a recession, which has led to a selloff in stock markets and lower prices for commodities, such as crude oil. RBC is the first of Canada’s major lenders to predict the country will enter a recession in the near term.
“When you’re at the top of the hill the only way to go is down. Canada’s economic growth has fired on all cylinders following pandemic shutdowns,” wrote RBC economists Nathan Janzen and Claire Fan in their report. “But a historic labour squeeze, soaring food and energy prices and rising interest rates are now closing in. Those pressures will likely push the economy into a moderate contraction in 2023.
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