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

CRA says it has $1.4 billion in uncashed cheques

CRA says it has $1.4 billion in uncashed cheques
The federal agency says it has approximately $1.4 billion worth of uncashed cheques in its coffers that have accumulated over the years, with some dating back to 1998. Each year, the CRA issues millions of payments in the form of benefits and refunds, but some cheques remain uncashed for various reasons, including misplacing a cheque or changing addresses.

CRA says it has $1.4 billion in uncashed cheques

3 people dead in a crash in BC's Interior, 2 people were seniors from Vancouver

3 people dead in a crash in BC's Interior, 2 people were seniors from Vancouver
Two seniors from Vancouver, a 71 year old man and 65 year old woman died on the spot. The driver of the pickup truck was taken to hospital with undetermined injuries. Impaired driving is suspected as a contributing cause to this collision.

3 people dead in a crash in BC's Interior, 2 people were seniors from Vancouver

6 Richmond RCMP investigations result in one suspect pleading guilty to seven charges

6 Richmond RCMP investigations result in one suspect pleading guilty to seven charges
The offences included a commercial break and enter in the 11000 block of Bridgeport Rd on January 30, 2022 and a commercial break and enter to a business in the 8000 block of Granville Ave on February 9, 2022.

6 Richmond RCMP investigations result in one suspect pleading guilty to seven charges

Canadians urged to donate blood as supplies low

Canadians urged to donate blood as supplies low
The organization says it currently has only four days worth of O+ blood type supply and five days worth of O- and B- blood types, along with six days worth of A- blood type and seven days worth of A+ and B+ blood types. Spokeswoman Delphine Denis says collections have been steadily decreasing since July 1.

Canadians urged to donate blood as supplies low

Suppression efforts for Okanagan, B.C., wildfire

Suppression efforts for Okanagan, B.C., wildfire
The nearly 60-square-kilometre wildfire is located about 21 kilometres southwest of Penticton. It has prompted an evacuation order of more than 500 properties and put more than 1,000 others under orders to be ready to leave at short notice.

Suppression efforts for Okanagan, B.C., wildfire

Two dead in Abbotsford, BC following police chase

Two dead in Abbotsford, BC following police chase
Police say the car was first spotted at about 3 p.m. and then again in a different area just after 4 p.m. They say they knew based on recent information that the vehicle had been involved in a recent violent crime in another jurisdiction and authorized a police pursuit.

Two dead in Abbotsford, BC following police chase