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The economy in Canada: where we are, where we’re going

Understand what experts say about the Canadian economy today and what prospects we have for the future of this country.

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Predictions for the future of the economy in Canada

canada flag flying in the middle of the mountains
The Canadian economy is doing well, but will it be for long? Read and find out. Source: Pixabay

In fact, the year 2022 is being one of the most atypical for the economy in Canada. This year, inflation and gasoline prices reached all-time highs.

In addition, the country is undergoing a post-pandemic recovery and is still struggling to re-establish its supply chain.

That same year, the country reached a very low unemployment rate while wages are still rising. Relative to GDP, Canada’s economy has slowed down but still shows signs of growth.

Also, mortgage interest rates have become more expensive. However, the price of houses in the real estate market fluctuated and was lower than expected. All this in the same year!

However, do not forget that the year is not over yet. Quite the contrary: now that we are in the middle of 2022. At that moment the rumors about economic recession are stronger.

But, you must have already realized how difficult it is to analyze this set of disconnected signals to try to predict something.

That’s why we turned to the opinion of the country’s economic experts to try to answer basic questions: what to expect from the future of Canada’s economy?

Take a look at the opinions of leading experts to be more reassured and hopeful (or not so much!)

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Factors that are affecting the economy in Canada

In a playful way, we can understand Canada’s economy with a great tug of war game. On the one hand, there are factors, such as inflation, that try to pull the country’s economy into recession.

On the other hand, there are factors such as GDP and low unemployment “balancing the balance”.

Thus, the question arises: by the end of the year, which of the two teams will be the winner of the competition?

With the help of data generated by Statistics Canada and expert analysis, we will answer that question. See below:

Canadian GDP

The national Gross Domestic Product is one of the indices that still give us hope for a “soft landing”.

Despite the slowdown, it remains positive. In the first quarter of 2022, the economy grew by 3.1%, down from 6.6% in the first half of 2021. The main impact came from exports, which fell by almost 10%.

However, there is good news. According to FactSet, by the end of the year, the forecast is for the economy to “stay in the green” growing 3.7%.

Inflation

The main concern in Canada’s economy today. This year, we recorded the highest inflation in the last 31 years: 8.8%. This fact caused prices in the supermarket and in almost everything to skyrocket.

However, even in this scenario, there is hope. According to the Business Prospects Survey, companies are motivated to invest and hire more employees.

For Pedro Antunes, chief economist at the Conference Board of Canada, this kind of sentiment is important. According to the expert, when a large number believe in a recession, it tends to come more quickly.

Thus, companies are playing an important role in keeping Canada’s economy healthy.

The Bank of Canada

Royal Bank of Canada facade
The future of your credit card debt depends on what happens at that bank. Source: Flickr

In an attempt to contain inflation, the Bank of Canada is raising the benchmark interest rate. In June, our interest rate was raised by 50% to 1.5%.

However, FactSet believes we will be at the 2.5% rate by the first quarter of 2023. A more aggressive tightening could have results in GDP and affect the real estate market, for example.

Also, credit card debt is expected to get higher.

Real estate market

In the current scenario of Canada’s economy, home prices continue to rise by almost 10%. However, this was the smallest price increase since March 2021.

As higher interest rates drive buyers away, we may see home prices a little later in the year.

Wages and unemployment

This year, after the pandemic, we saw the unemployment rate reach historically low levels. Only 5.1% of people looking for work could not find it. Thus, as labor becomes scarce, wages tend to rise.

However, the increase in revenue has not yet been able to offset inflation. For Pierre Cléroux, vice president of research and chief economist, the labor shortage will remain for a long time.

This could mean better wages for the Canadian people. However, it also means that companies will struggle to restore the damage to the supply chain.

The current state of the economy in Canada

At the moment, Canada’s economy is doing well and is able to mitigate the effects of rising gasoline and inflation.

As Peter Armstrong, senior business reporter for CBC News points out, one of the main factors driving this balance is the rise in commodities.

As an exporting country of primarily agricultural goods, Canada has benefited from rising food prices around the world.

In this way, at a time of global recession, the agrarian sector manages to generate a profit that positively impacts GDP. In the commerce sector, the country is experiencing a high employment rateg.

It is one of the countries that shows the highest growth in Gross Domestic Product among the members of the G7.

Canadian flag with dollar sign

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What to expect from the Canadian economy

Canadian family playing hockey
This is the great engine of the Canadian economy. Source: Flickr

After all, should we wait for a recession? Indeed, this is a question that comes to mind when it comes to the future of Canada’s economy. In addition, it is the way to answer all the uncertainties in just one sentence.

Well, a very renowned expert has looked into this issue and reached a verdict. In one of his more recent articles, Tony Stillo, director of Oxford Economics, spoke of his concerns.

For experts, the level of indebtedness of Canadian families is one of the most worrying factors in the economy. After all, as Pierre Cléroux also said, families are the great engine of Canada’s economy today.

However, Tony Stillo says we are less likely to have a recession for at least the next 12 months. For the specialist, the chances of this happening are 40%. In this way, it is possible for the country to go through this moment without major difficulties.

Now that you know how the economy is in Canada, find out what’s happening with home prices in the country. Is it time to buy your own home? Click and find out.

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About the author  /  José Gonçalo

I started reading about finance only to find better options than savings. Since then, I have never stopped studying finance, and I believe that writing about it is the best way to help individuals feel fulfilled and have a healthy financial life. Today, I balance finance and medical school studies.

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