Canadian GDP growth at a virtual standstill in 2023: Conference Board of Canada

According to a new report  from The Conference Board of Canada, GDP is forecast to be at a virtual standstill in 2023 before seeing a modest 1.4 per cent improvement in 2024.

Andrea Piacquadio

“Troubles in the U.S. financial system are not likely to be replicated directly in Canada on account of the country’s more concentrated banking system,” said the Hidden Shoals: Canada’s Three-Year Outlook report. “Even the indirect effects will be muted. Business investment was already expected to be weak in Canada, outside the energy sector, so there is relatively little business lending to pull back from. The same applies to the consumer sector, which will continue to rein in demand for homes and big-ticket items that would normally need to be financed with loans.

“Through all this, our forecasts for GDP are keeping to the pattern of growth slowing through 2023 to a virtual standstill, with an eventual recovery beginning in early 2024. We made the right call in our previous 2022 Q4 forecast, expecting the build-up of inventories through the middle part of last year to start reversing. Slower inventory growth will carry on through 2023 as a result of weak retail performance and wary consumers.

“For the year, real GDP will expand by 0.9 per cent in 2023. Growth will then pick up to 1.4 per cent in 2024 and 2.5 per cent in 2025. Once rates start to fall, therefore, there will be underlying support for growth from both consumers and businesses.”

Key findings of the report include:

• The rapid rise in interest rates in the past year reminds us that even safe assets like U.S. Treasuries can become risky if
  portfolios are not managed prudently;
• The financial sector turmoil in the United States and in Europe will remain contained and likely limit the future rise
  of benchmark lending rates worldwide. The turmoil will also prolong the current economic slowdown;
• Real output growth in Canada will slow to a crawl through most quarters in 2023;
• Business sector investment will be weak this year, except in the oil patch. That sector will also help to lift export performance;
• The consumer sector will not be the driving force of past years and personal spending will weaken for durable items, but
  incomes and savings levels will remain relatively buoyant; and
• Employers have so far absorbed the surge in new immigrants to Canada in the past few years. Labour markets are likely
  at peak participation, and while they may weaken slightly in the next 12 months, we are not expecting much downward
  wage pressure.

(Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald, covering sports, crime, politics, health, faith, city and breaking news, and business. He works as well as a freelance writer for several national publications and as a consultant in communications and media relations/training. Mario was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)