The February survey average for short-term interest rates is consistent with the Bank of Canada's benchmark rate remaining at 4.5 per cent until the fall of this year, before gradually declining to below 3 per cent by the end of 2024.Ĭonsistent with recent trends, private sector economists expect Consumer Price Index (CPI) inflation to fall below 3 per cent in the third quarter of 2023 and to reach about 2 per cent, the Bank of Canada's target, in the second quarter of 2024. The forecast for short-term interest rates in Canada was revised up by 0.4 percentage points, on average per year, compared to FES 2022. On an annual basis, the unemployment rate is expected to increase from 5.3 per cent in 2022 to a still low 5.8 per cent in 2023 and 6.2 per cent in 2024 before gradually declining to 5.7 per cent by 2026, broadly in line with FES 2022 and reflecting the resilience of the Canadian labour market. This would represent a very mild downturn compared to the peak-to-trough decline of 4.4 per cent in the 2008-09 recession, and even to the 1.6 per cent decline in the downside scenario considered in FES 2022.Ĭonsistent with the expected slowdown in real GDP growth, Canada's unemployment rate is expected to rise from near record-low levels to a peak of 6.3 per cent by the end of 2023. With the full force of monetary tightening yet to be felt, the survey average points to a shallow recession this year with a peak-to-trough decline in real GDP of 0.4 per cent. Annual real GDP growth is expected to strengthen to about 2 per cent on average for the rest of the forecast horizon, reflecting a return to trend for long-run growth rates.Ĭomparisons of the February survey average to real GDP growth forecasts from other institutions can be found in Table A1.2. Overall, the revisions leave the level of real GDP about 0.6 per cent lower by 2024 compared to FES 2022. Real gross domestic product (GDP) growth is projected to slow from a strong 3.4 per cent in 2022 (slightly better than the 3.2 per cent expected in FES 2022) to 0.3 per cent in 2023, before rebounding to 1.5 per cent in 2024 (previously 0.7 per cent and 1.9 per cent, respectively). Private sector economists expect Canada's economy to slow more than was projected in the 2022 Fall Economic Statement (FES 2022) (Table A1.1). To facilitate prudent economic and fiscal planning, the Department of Finance has developed two scenarios that consider faster or slower growth tracks relative to the February survey (see below for details). The macroeconomic inputs of the February 2023 survey continue to provide a reasonable basis for fiscal planning. However, outcomes that are better or worse than the survey are both plausible. Since the survey was conducted in early February, developments in financial markets have raised the odds of a more pronounced slowdown in the global economy.
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