The Canadian economy will experience a significant slowdown by the end of the year and early next year due to interest rates, which the Bank of Canada is expected to continue to raise.
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This is what emerges from a report published Thursday by the Parliamentary Budget Officer (PBO), Yves Giroux, which provides for an increase in the key rate to 4% by the end of the year.
Note that since March, the key rate has gained 300 points, going from 0.25% to 3.25%.
Taking into account the current key rate and future increases, Mr. Giroux deduces that spending should continue to slow in many sectors, particularly in real estate.
Combined with inflation, this dynamic should lead to a marked drop in consumption in general.
According to the PBO, the unemployment rate is expected to reach 5.8% nationwide by the end of 2023, compared to the current 5.2%.
Mr. Giroux, however, foresees a gradual decline in the federal government’s deficits and in the ratio of the debt to its gross domestic product (GDP), which is mainly explained by an increase in government revenues, which is in turn partially due to the price increase.
Thus, if the federal deficit was $97 billion (3.9% of GDP) in the previous fiscal year, it could shrink to $25.8 billion (0.9% of GDP) for next year. .
Inflation was 7% in August. This was down slightly from previous months, but still a high number in absolute terms. The figure was 7.6% in July.