Economic forecasts revised downward by the Conference Board of Canada

Economic forecasts revised down by Conference Board of Canada

UPDATE DAY

A recession is not expected, but the risk is growing, according to the latest report from the Conference Board of Canada, which has revised its economic forecasts downwards.

In this report released on Tuesday, the Conference Board of Canada cut its two-year economic projections and projects that Canada's real gross domestic product (GDP) will grow 3.5% in 2022 and then 2.6% in 2023, down from the last March 2022 projections.

Escalating interest rates and prices, along with a sharp slowdown in U.S. growth, are contributing to the decline, according to the report.

“The problem of inflation, more tricky than expected, is exacerbated by the war in Ukraine and disruptions in supply chains that have favored spending on goods over services during the pandemic,” said Pedro Antunes, chief economist at the Conference Board of the Canada.

The latter, however, believes that the Canadian economy is “still operating a few percentage points below capacity” and that soaring commodity prices have boosted the country's energy and agricultural production.

So As central banks around the world raise interest rates in an attempt to dampen rising inflation, the Bank of Canada is expected to The Bank of Canada is expected to raise its key interest rate by 0.75% on Wednesday.

The Conference Board of Canada expects this fourth increase in 2022 to be followed by additional increases in September, October and December. Another increase is scheduled for January 2023.

“Difficult times lie ahead for many, particularly in the housing sector in Canada, where interest rate hikes have led to lower prices. Markets started this year with strong demand outstripping housing supply. Buyers were attracted by low interest rates, strong job creation and the illusion that prices would continue to rise.