OTTAWA — The experts predict a recession for Canada early next year as fallout of rising inflation and interest rates spurred by massive pandemic spending and soaring energy prices. The Canadian government added to the problem by preventing increased production of oil.
A recession occurs when gross domestic product declines (aka “negative growth” in a country’s economic output) for two financial quarters (six months). The typical hallmark of a recession is a rise in unemployment.
Conference Board of Canada chief economist Pedro Antunes told Farmers Forum: “I still think the bigger challenge for the ag sector will be the issues around workers and being able to find adequate labour.”
“We expect growth to slow … next year and for the (Canadian) economy to enter a technical recession in the first half of 2023,” Jean-François Perrault, chief economist and senior vice-president at Scotiabank Economics, predicts in an Oct. 17 analysis titled “Policy Missteps Taking Their Toll.”
Canada won’t be alone, however, as “the global economy cannot avoid a recession,” according to the article co-authored with Scotiabank forecasting director Rene Lalonde.
RBC economists Nathan Janzen and Claire Fan similarly predicted a downturn will hit the Canadian economy “as early as” the first quarter of 2023.
Former Bank of Canada governor Mark Carney also assured a Senate committee last month that a recession is likely in 2023, though the presumed future Liberal Party leadership candidate suggested Canada will fare better than other countries. Carney told the senators that China and the UK are already in recession and that Canada’s largest trading partner, the U.S., will join the club next year.
Carney said that more interest rate hikes would be required to slow the Canadian economy and cut the domestic inflation rate, which hit 6.9% in September, according to figures released in October by StatCan. “The combination of all of that is likely to lead to a recession, or at least a few quarters of negative growth in Canada,” he said.
The Conference Board of Canada projects a 70% chance of a recession in the next 12 months — but that’s based on the Board’s preferred but harder-to-hit definition. The Board calls a recession a “decline in economic activity, impacting many sectors, and lasting longer than a few months.”
By that measure, the board also predicts a 75% chance of recession in the U.S. next year.
Farm Credit Canada chief economist J.P. Gervais said that, “The probability of a technical recession has recently increased and we expect it to continue climbing.”