Canadian recession fears misguided – Morneau

Speculations that Canada is headed towards a recession – or worse, is already in one – are misinformed, Finance Minister Bill Morneau stated.

“They would be incorrect,” Morneau said the morning after the release of the latest federal budget, as quoted by the Financial Post. “That would be technically wrong and certainly not in line with our expectations.”

The statement came in the wake of various observers stating that the recent sales declines in the Canadian housing market will lead to long-term economic and fiscal stability.

Gluskin Sheff chief economist David Rosenberg has warned that “if we’re not in a recession yet, we’re just basically one notch away.”

Fidelity Investments portfolio manager and former BoC advisor David Wolf has argued that Canada may already be in a recession, as proven by the numbers. GDP fell by 0.1 per cent in November and December, despite national growth reaching 0.4% in Q4 2018.

Moreover, Statistics Canada’s most recent reading of household wealth levels (covering the fourth quarter as well) indicated that the latest debt-to-disposable-income ratio was 179%.

Read more: Real estate contributing less to the moderating Canadian economy

Morneau predicted that the national economy will exhibit notable recovery from April onwards, after the weak growth of Q4 2018 and Q1 2019.

“We’re expecting … that we will have a return to growth at expected levels in the second quarter (of 2019) and our long-term forecasts are positive,” Morneau noted.

The federal budget is built upon forecasts that the GDP will see 1.8% growth this year. Deficit is expected at $20 billion in 2019, and is predicted to shrink to $10 billion by 2024.

Morneau assured that the government won’t engage in further deficit spending, should Canada indeed suffer recession.