Canadian provinces are expected to experience limited economic activity and anemic growth for the rest of the year and even into 2024, but the risk of a prolonged recession is increasingly unlikely, according to the Conference Board of Canada.
The Conference Board’s latest provincial outlook, released on Tuesday, predicts that Canada will see very little improvement in its economy this year, with at least one quarter of negative growth expected.
But the most pessimistic scenarios, which predicted a prolonged recession or major imbalances in the labor and capital markets, now appear less likely, says the organization’s chief economist, Pedro Antunes.
“The economy is hitting a wall,” Antunes said in an interview Tuesday. We are essentially seeing a flattening of economic activity. »
The forecast echoes the latest numbers released Tuesday by Statistics Canada, which showed real gross domestic product (GDP) was unchanged in the fourth quarter of 2022 – a slightly steeper slowdown than expected.
Despite this forecast of weak output growth this year, the Conference Board still expects activity to rebound in 2024 and 2025 as financial restrictions ease. In his view, the accommodation, transportation, and arts and recreation sectors will become engines of economic growth through 2025.
The report says inflation has now turned a corner and the country is entering a period of stable, albeit still restrictive, interest rates. Borrowing costs are thus expected to restrain the consumer sector, hitting the economies of Ontario, British Columbia and Quebec the hardest, according to the report.
Quebec, Ontario, New Brunswick
The Conference Board observes that the effects of monetary policy are gradually being felt in several areas of the Québec economy, particularly investment and consumption.
Demand for housing is decreasing due to rising interest rates and will remain modest in the years to come, given the low expected population growth. Quebec’s GDP growth is expected to be 0.2% in 2023, one of the weakest among the provinces, before reaching 2.0% in 2024.
“Quebec will experience a very marked slowdown in growth in 2023, but its medium-term fundamentals as the country’s renewable resource capital should encourage growth in the years to come – provided it can find enough people in its aging workforce,” said the Conference Board.
For Ontario, the Conference Board forecasts GDP to grow 0.5% this year and 2.5% in 2024. The province’s output growth will outpace that of Canada as a whole this year and next. next.
Although New Brunswick continues to experience population growth, the Conference Board predicts that its economic growth will be weak – 0.1% in 2023 and 1.8% next year.
“The province’s finances continue to surprise on the upside,” the report said, noting that a recent budget update projected a $774.4 million surplus as population growth pushes up income tax revenue. personal income.
In Nova Scotia, the increase in housing and energy costs was more pronounced than in most other provinces. As a result, real household consumption is expected to decline this year, and the province’s GDP will only increase by 0.3%.
Among the provinces, Newfoundland and Labrador will have the fastest growing economy in 2023, as offshore oil production resumes, according to the report. The economies of Alberta and Saskatchewan will also do well in the near term, fueled by the oil and gas sector, and the favorable outlook for agriculture, according to the provincial outlook.
The Conference Board forecasts that GDP will grow this year by 2.2% in Newfoundland and Labrador, 0.9% in Prince Edward Island, 2.1% in Alberta, 1 .6% in Saskatchewan, 0.9% in Manitoba and 0.4% in British Columbia.