Deloitte Canada outlines the nation's prospects
The ongoing economic volatility in Canada will likely ease next year when growth resurges and the central bank begins its interest rate cuts, according to a new forecast by Deloitte Canada.
The country will particularly benefit from less pressure south of the border amid a positive outlook for the United States, said Dawn Desjardins, chief economist at Deloitte Canada.
Healthy population growth will also make up for some of the slowing impacts of mounting household debt, interest payments, and inflation. Deloitte is projecting a 2.7% surge in the Canadian population this year, significantly outstripping the previous annual growth record of 2.2% seen back in 1971.
“We do have an economy getting back on its feet in the first half of next year,” Desjardins said. “The recovery will pick up steam in the second half of 2024 because it’s during the time we anticipate the Bank of Canada will be able to pivot from having high interest rates we're living with today.”
However, the road to getting there would be especially difficult, especially over the next two quarters.
“Canada’s economy has entered a rough patch and the growth is likely to be negligible,” Desjardins said. “In fact, we have a few negative quarters in the forecast.”
Deloitte is anticipating minuscule GDP increases of 1% in 2023 and 0.9% in 2024.
The Bank of Canada's recent decision to hold rates doesn't signal an end to potential rate hikes, warns James Laird, co-CEO of Ratehub and president of CanWise.
— Canadian Mortgage Professional Magazine (@CMPmagazine) September 11, 2023
Full article: https://t.co/Tt2uOIZbHq#mortgageindustry #ratehikes #interestrates #mortgagebroker
Rate hikes a driving factor in the slowdown
The Bank of Canada’s rate hikes have been accompanied by sharp increases in household debt and interest repayments – trends that Desjardins is expecting to persist for the foreseeable future.
“We do think the housing market will continue to be relatively sluggish [in the near term]," Desjardins said.
Deloitte warned of the possible domino effect of this deceleration.
“When that happens, people are not buying durable goods like refrigerators, stoves, and washing machines they would normally purchase when they buy a new home,” Desjardins said.
“We have finally seen evidence that consumers are taking a step back. The bank’s rate increases are stressing some budgets.”
