Economy

Is a recession coming for the Canadian economy?

Published

2 years ago

April 28, 2022

Toronto –

As inflation driven by the pandemic and Russia’s war on Ukraine continues to impact the economy in Canada and around the world, there are serious concerns that a recession could be on the horizon.

Earlier this month, Deutsche Bank became one of the first major banks to forecast a U.S. recession later next year. At the time, the bank said it expected to see a “mild” recession. But on Wedensday, it revised its forecast, warning a recession could be “significant.”

Former CIBC World Markets chief economist Jeff Rubin says he agrees with that outlook and expects a recession could be even worse than Deutsche Bank’s prediction.

“It probably goes without saying that that outlook is equally valid for the Canadian economy, as it is for the American economy,” he told CTV’s Your Morning on Thursday. “The reason why that outlook is the most likely to occur, is because … runaway inflation has always led and ended in significant recessions for the last 50 years.

Last week, Statistics Canada reported that Canada’s inflation rate had risen to 6.7 per cent in March, a 31-year-high. In the U.S., the Department of Labor two weeks ago said inflation spiked to 8.5 per cent, the highest since 1981.

COVID-19-induced supply chain constraints around the world continue to contribute to higher prices on everyday goods. On top of that, sanctions on Russia imposed by the U.S., Canada and Europe have propelled skyrocketing prices for energy and wheat.

The Bank of Canada and the U.S. Federal Reserve have attempted to curb inflation by steadily increasing interest rates. Two weeks ago, Canada’s central bank raised its key interest rate by a half point to one per cent. The U.S. Fed last month approved a 0.25 percentage point rate hike to 0.5 per cent, and Fed Chairman Jerome Powell has said the central bank needs to raise rates “expeditiously” to address inflation.

But Deutsche Bank says it expects the Fed will hike interest rates so aggressively a recession could ensue.

Typically, a recession leads to deflation or slower inflation, as declining demand for goods and investment drives prices down. However, in the worst-case scenario, Rubin says we could see “stagflation,” a term used to describe high inflation coinciding with poor economic growth and high unemployment that was seen in the 1970s.

“I think that that’s a real concern. The World Bank just put out a report saying that the world faces the largest inflation shock that it has in the last 50 years. And there’s unique factors happening here that will not necessarily be remedied by a recession,” he said.

“Russia … is the world’s largest resource producer. If they continue (the war), then we may see pressures on resource prices, even with a recession, because so much of supply from wheat to oil will be taken off the market,” Rubin continued.

But not all economists are predicting economic doom and gloom. In a forecast published last week, Goldman Sachs said it expects the U.S. economy to avoid a contraction, given the red-hot job market and that households have more savings at their disposal compared to the onset of previous recessions. The Wall Street bank says the likelihood of a recession is 15 per cent in the next 12 months and 35 per cent within the next 24 months.

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Economy

B.C.’s debt and deficit forecast to rise as the provincial election nears

Published

2 days ago

September 10, 2024

Anne Joseph

VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.

Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.

Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”

The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.

Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.

“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”

Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.

Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.

Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.

B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.

The election is expected to be called on Sept. 21, with the vote set for Oct. 19.

“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”

Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.

Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.

The premier said that now is not the time to reduce supports and services for people.

Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.

Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.

This report by The Canadian Press was first published Sept. 10, 2024.

Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.

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Economy

Mark Carney mum on carbon-tax advice, future in politics at Liberal retreat

Published

2 days ago

September 10, 2024

Anne Joseph

NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.

But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.

He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.

Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.

Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.

Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.

This report by The Canadian Press was first published Sept. 10, 2024.

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Economy

Nova Scotia bill would kick-start offshore wind industry without approval from Ottawa

Published

2 days ago

September 10, 2024

Anne Joseph

HALIFAX – The Nova Scotia government has introduced a bill that would kick-start the province’s offshore wind industry without federal approval.

Natural Resources Minister Tory Rushton says amendments within a new omnibus bill introduced today will help ensure Nova Scotia meets its goal of launching a first call for offshore wind bids next year.

The province wants to offer project licences by 2030 to develop a total of five gigawatts of power from offshore wind.

Rushton says normally the province would wait for the federal government to adopt legislation establishing a wind industry off Canada’s East Coast, but that process has been “progressing slowly.”

Federal legislation that would enable the development of offshore wind farms in Nova Scotia and Newfoundland and Labrador has passed through the first and second reading in the Senate, and is currently under consideration in committee.

Rushton says the Nova Scotia bill mirrors the federal legislation and would prevent the province’s offshore wind industry from being held up in Ottawa.

This report by The Canadian Press was first published Sept. 10, 2024.

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