Is the national economy set to avoid a downturn?
Alberta’s economy has performed better than the rest of Canada in recent times with recession unlikely to occur, according to a top economist.
Pierre Cléroux, chief economist for the Business Development Bank of Canada (BDC), also told a Red Deer & District Chamber of Commerce luncheon that he believed Canada’s economy is set to have a soft landing and will reach financial stability.
Inflation has caused the Bank of Canada to increase its benchmark rate multiple times since 2022, impacting the economic performances of the country. Cléroux stated that the strategy was successful as inflation was beginning to draw closer to the 2% target.
“We need to rebalance the budget because what you should do, what we learn as economists, is you need to reduce your debt when times are good. So, when you have a recession, you are able to spend money to help people that need help,” said the economist, further claiming that inflation would reach 2.2% if the rate hikes imposed were removed.
Cléroux also said he believes rates will decrease within the next six months as the economy begins to slow down and mortgage renewals come about. Savings accumulated by Canadians during the pandemic, low unemployment rates, and population growth are some of the factors that will help stimulate growth in the economy.
The economist also stated that there were not enough construction workers to build homes and higher immigration levels would help address that problem, further asserting the need for cities to make building permits easier to obtain for developers.
“There’s no doubt that [with] inflation, higher interest rates, people are more squeezed. People pay more for their mortgages, for their car loans, but the job market is good, salaries are increasing, so it’s [about] making different choices,” said Cléroux.
“The good news is interest rates will start to decline. So, people, when they renew their mortgages at the end of this year or next year, they won’t pay as much as now,” he added.
Alberta was also found to have a consistent growth in its economy because of the oil and gas sector. Its population growth by more than 4% in the previous year has also been beneficial to its economy as it came alongside the growth of the labour market with an additional 17,000 jobs added in the first month of 2024.
Cléroux also believed that the province’s GDP growth will reach 1.3%, which will be higher than the rest of Canada but tied with Saskatchewan.
