Close X
Monday, November 11, 2024
ADVT 
National

Economy to slow considerably this year: PBO

Darpan News Desk The Canadian Press, 13 Oct, 2022 10:35 AM
  • Economy to slow considerably this year: PBO

OTTAWA - The parliamentary budget officer is projecting the economy will slow considerably in the second half of 2022 and remain weak next year as the Bank of Canada continues to raise interest rates.

In his latest economic and fiscal outlook, budget watchdog Yves Giroux says he expects the Bank of Canada to raise its key interest rate to four per cent by the end of the year, a move which is in line with financial markets' expectations.

Economists are anticipating an economic slowdown as higher interest rates slow spending by people and businesses.

Since March, the Bank of Canada has raised its key interest rate from 0.25 per cent to 3.25 per cent in an effort to combat inflation. Canada's annual inflation rate was 7.0 per cent in August.

The housing market has already begun cooling in response to higher interest rates, however, the full effect of the central bank's rate hikes will take more time to work its way through the economy.

The PBO report also projects the unemployment rate will rise to 5.8 per cent by late 2023 before falling again. That increase is moderated by decreases in the labour force participation rate as more Canadians retire.

Statistics Canada's September job report showed the labour market was still tight, with the unemployment rate at 5.2 per cent.

As inflation slows and heads toward the central bank's target of two per cent, the PBO expects the Bank of Canada to begin lowering interest rates toward the end of next year, bringing its key rate down to 2.5 per cent by the end of 2024.

The outlook also estimates the federal deficit will decline to $25.8 billion, or 0.9 per cent of GDP, for the 2022-23 fiscal year.

The deficit was $97 billion, or 3.9 per cent of GDP, during the prior fiscal year.

Assuming no new measures are introduced and existing temporary measures expire as expected, the PBO estimates the deficit will decline further to $3.1 billion, or 0.1 per cent of GDP, by 2027-28.

The PBO is also projecting that by 2027-28, the federal debt-to-GDP ratio will decline from its peak in 2020-21, but still remain above pre-pandemic levels.

The PBO said the uncertainty surrounding the report's projections is high. It outlined various risks to its forecasts, including tighter monetary policy causing a more severe economic slowdown, inflation persisting longer than expected and higher fiscal spending.

"With the synchronized tightening of monetary policy by major central banks around the world to reduce high inflation, there is a risk of a more severe global slowdown, which would negatively affect the Canadian economy and federal finances," Giroux said.

MORE National ARTICLES

Ambulance review after report of B.C. infant death

Ambulance review after report of B.C. infant death
A statement from BC Emergency Health Services says in response to questions about the death in Barriere that it received a call to respond to a patient at a home in the community north of Kamloops on Thursday. It says the closest available ambulance was immediately dispatched, and local firefighters were also requested to assist with the call.

Ambulance review after report of B.C. infant death

$60M back-to-school fund for B.C. families

$60M back-to-school fund for B.C. families
Education Minister Jennifer Whiteside says families are already struggling with rising costs due to inflation and the government's fund aims to take the sting out of costs associated with the return to school next month. Whiteside says every school district in the province will receive a minimum of $250,000.

$60M back-to-school fund for B.C. families

VPD identify suspects in assault

VPD identify suspects in assault
The attack occurred outside a convenience store near Commercial Drive and East 10th Avenue in the early hours of July 31. Shortly after midnight, a 42-year-old man stopped to buy a slurpee. There was a brief verbal confrontation between the man and another person who was waiting in line, and when the victim left the store he was jumped by three men.

VPD identify suspects in assault

Floods, drought a major risk to Canada's economy

Floods, drought a major risk to Canada's economy
The report, titled "Aquanomics," is being published today by GHD, a global engineering and architecture services firm. GHD's Canadian water lead Don Holland said there are lots of reports that count up insured losses and physical damage after major events like last fall's atmospheric river in British Columbia.

Floods, drought a major risk to Canada's economy

Cruise ship stuck in B.C. over tugboat strike

Cruise ship stuck in B.C. over tugboat strike
Celebrity Cruises says the Celebrity Eclipse, which had been due to depart Sunday afternoon, is unable to leave the Port of Vancouver without the tugs and staff are "working diligently" with local authorities to resolve the situation so the ship can sail.

Cruise ship stuck in B.C. over tugboat strike

Hiring spree helping with backlogs: ministers

Hiring spree helping with backlogs: ministers
Yet while cabinet ministers say the additional hires have started to make a difference, they acknowledge that far more work is needed when it comes to providing Canadians with the services they deserve. The comments came during an update on the work of the government's special task force to help tackle major delays with immigration applications and passport processing.

Hiring spree helping with backlogs: ministers