Economy

Canadian Economy to Rebound in 2024, Deloitte Canada Forecasts

Published

1 year ago

September 29, 2023

Canadian Economy to Rebound in 2024, Deloitte Canada Forecasts

Canada’s current economic struggles are expected to ease by the second half of next year, according to a new forecast from Deloitte Canada. The report, released on Thursday, predicts a return to growth and a reduction in the Bank of Canada’s key lending rate in 2024, marking an end to the country’s near-term economic difficulties.

The country’s economy has entered a challenging period, with negligible growth expected over the next two quarters. “In fact, we have a few negative quarters in the forecast,” said Dawn Desjardins, chief economist at Deloitte Canada and co-author of the report. This slowdown is primarily due to the Bank of Canada’s ongoing efforts to curb high inflation, which have resulted in increased household debt and interest payments.

Despite these challenges, Deloitte expects the Canadian economy to start recovering in the first half of next year. “We do have an economy getting back on its feet,” Desjardins explained. The recovery is anticipated to gain momentum in the second half of 2024 when the Bank of Canada is projected to lower its high interest rates.

The report also revised earlier predictions for Canada’s GDP growth. It now estimates a rise of one per cent this year and 0.9 per cent next year, a significant improvement from Deloitte’s previous forecast of a 0.9 per cent contraction in 2023.

However, some sectors may continue to struggle in the near term. The housing market, for instance, is expected to remain sluggish due to high interest rates and increasing numbers of households refinancing their properties to manage monthly mortgage payments. This trend could also negatively impact sales of durable goods such as refrigerators and washing machines, which consumers typically purchase when buying a new home.

Despite these headwinds, several factors are likely to support Canada’s economic recovery. A stronger-than-expected U.S. outlook and continued population growth in Canada are expected to offset some of the downward pressure from high household debt and persistent inflation. Canada’s population is projected to increase by 2.7 per cent this year, the highest surge since a 2.2 per cent rise in 1971.

However, this rapid population growth could outpace job gains in the coming months, leading to a rise in unemployment to 5.9 per cent early next year and potentially slowing down consumer spending. Deloitte’s report also suggests that real consumption on a per capita basis dropped 1.5 per cent over the last year, aligning with falling real wages and high interest rates.

Looking ahead, Deloitte Canada estimates the overnight interest rate will fall to a neutral level of three per cent by mid-2025. While consumer spending is projected to grow by two per cent this year, it is expected to slow to a pace of 1.2 per cent in 2024.

The business sector’s investment outlook remains subdued in the near term due to cost pressures and economic uncertainties dampening confidence among Canadians. However, these challenges are expected to ease as the economy recovers, setting the stage for more robust growth in the future.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

12 months ago

December 26, 2023

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.

The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.

Economy

China identifies second set of projects in $140 billion spending plan

Published

12 months ago

December 25, 2023

China identifies second set of projects in $140 billion spending plan

© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo

SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.

With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.

The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.

China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.

The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.

“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.

The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.

($1 = 7.1315 renminbi)

Economy

Russian central bank says it needs months to make sure CPI falling before rate cuts -RBC

Published

12 months ago

December 25, 2023

Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.

“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.

Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.

“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.

The bank will next convene to set its benchmark rate on Feb. 16.

The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.