Get ready for an economically challenging 2023 CanadiansInvest
For economic prognosticators, the year that just ended threw up some big surprises, including the first land war in Europe since 1945, spiralling inflation, and a series of rapid-fire interest rate increases as panicked central bankers rushed to tame soaring prices.
The good news is that overall economic output and employment in Canada have more than fully rebounded from the brief COVID-induced recession of 2020. Indeed, for at least the past year, Canada’s economy has been operating above potential, meaning demand has exceeded supply. Economic momentum recently has been flagging amid slower global growth, rising interest rates and tumbling housing markets. The weakness is set to intensify into 2023. Canada will struggle to crank out positive economic growth this year. While we may avoid a technical recession , mainly owing to a fast-growing population, at best Canada is set for a “slowcession” as economic activity basically grinds to a halt.
As the economy cools and inflation diminishes, the Bank of Canada will ease its policy stance, with interest rates likely to decline toward the end of the year. But Canadians should not expect mortgage and other borrowing costs to drop all the way back to the record low levels seen in 2021.
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