Provincial economic prospects have further dimmed amid hikes in inflation and interest rates as well as a “souring global backdrop”, according to the latest provincial economic forecast by TD Economics.
“These headwinds are likely to culminate in 2023, when real GDP effectively stalls out across most provinces. Although job markets are heading into the autumn displaying ongoing signs of excess demand, regional unemployment rates appear poised to march steadily higher in the coming months,” said the report.
Alberta is expected to lead the country in 2023 with 1.8 per cent economic growth followed by Saskatchewan at 1.6 per cent and Manitoba and Newfoundland & Labrador both at 1.2 per cent.
“Households across Canada will face a growing financial squeeze from rising borrowing costs. We assume the Bank of Canada will hike its policy rate to 4.00 per cent this autumn, 75 bps higher than our June projection. Due to their relatively high debt-to-income ratios, households in Ontario, B.C., and Alberta face disproportionally large negative rate impacts on spending. On the opposite end of the spectrum, households in most of the Atlantic Region and Quebec should be partially shielded by their comparatively low burdens,” said TD Economics.
“The broad-based growth downgrades also reflect a weaker global growth backdrop. Growth prospects are particularly downbeat in Europe, which will likely impact exporters in the Atlantic Region, Ontario, and Quebec.
“Oil producing provinces have been benefitting this year from past gains in oil prices. However, since the summer, prices have pulled back substantially from their highs, leading us to shave our near-term WTI price forecast. We now project prices to continue to move lower, and see them hitting a floor of US$80 per barrel by the end of 2023.”
The report said rising interest rates signal even more downside for housing markets and TD Economics now forecasts a 22 per cent peak-to-trough decline in Canadian average home prices from 2022Q1 – 2023Q1. Ontario, B.C., and parts of the Atlantic Region should see the steepest declines, it added.
(Mario Toneguzzi is a veteran of the media industry for more than 40 years and named in 2021 a Top Ten Business Journalist in the world and only Canadian)
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