Canada could face an economic slowdown in 2023, the country’s deputy prime minister said on Tuesday, as a government report presented a scenario where a “mild recession” occurs in the first quarter of next year.
Chrystia Freeland told the House of Commons that the Canadian economy faces challenges as interest rates rises enacted by the Bank of Canada to curb inflation have slowed down the economy and pushed up mortgage payments.
“Our economy is slowing down,” Freeland, who is the country’s finance minister and deputy prime minister said. “Anyone who claims they could prevent the challenges ahead is wrong.”
The federal government on Thursday released a fall economic statement that provides two economic outlooks for the country.
The baseline scenario projects modest growth in 2023 that would put the fiscal deficit at C$36.4bn in 2022-23, and a “downside” scenario where the country falls into a “mild recession” in the first quarter of 2023 and leaves the deficit at $49.1bn.
Downside risks include global factors such as persistent energy crises in Europe, and further deterioration of the Chinese property market. The report also warned that interest rate rises in Canada could create a “sharper correction in the housing market.”
In her speech, Freeland struck an optimistic note, saying the Canadian economy has emerged from the pandemic stronger than its G7 allies, and that the country is prepared for a global economic slowdown.
“There is no country better placed than Canada to get through the coming global slowdown.”
She also introduced a series of policies aimed at easing Canadians’ pocketbooks, including tax credits and a plan to eliminate interest on student loans. The policies add up to C$22.1bn in new spending over six years.
The economic report also included a plan to tax share buybacks on public companies in Canada. The levy would be 2 per cent on the net value of buybacks, double the proposed 1 per cent tax introduced in the US Inflation Reduction Act.
“We’re taxing share buybacks, to make sure that large corporations pay their fair share, and to encourage them to reinvest their profits in workers and in Canada,” the report said.
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