Will Canada avoid a recession this year?

Deloitte says 'worrisome trends continue to weigh on economy'

Will Canada avoid a recession this year?

Good news for employers: Canada will avoid a recession in 2024, according to a report from Deloitte.

This is the case despite ongoing downward pressure from higher interest rates, according to the report.

“Despite the challenges of high debt loads in an elevated interest rate environment, the Canadian economy looks set to achieve the somewhat elusive soft landing — one where it avoids a recession while inflation returns to target,” said Deloitte.

And there are some positives to look at, it said.

Specifically, “the economy ended 2023 with better-than-expected growth, the labour market has held up into 2024 and population growth remains robust,” said Deloitte.

Two in three (67 per cent) employers are optimistic about the economic outlook today, 65 per cent have the same sentiment for the next 12 months and 73 per cent for the next five years, reported ATB Financial back in November 2023.

Challenges ahead for Canadian economy

However, challenges to the Canadian economy still remain, according to the Deloitte report.

“We’re not yet out of the woods… Our productivity performance remains anemic and business investment is waning, both of which create downside risk to the country’s economic outlook in the near term.”

With these, Canada’s economy will likely be “stuck in neutral” in the first half of 2024, “squeaking out gains of below 1% at annual rates per quarter,” said Deloitte.

“This will limit read GDP growth to 1% this year despite better economic fortunes expected toward the end of the year when the recovery accelerates thanks to lower interest rates and inflation.”

Statistics Canada (StatCan) reported on Thursday that Canada's GDP rose 0.6 per cent in January, with a preliminary estimate of 0.4 per cent growth in February, noted CTV News.

‘We can look forward to better economic conditions’

Still, the end 2024 will be better overall for Canada, said Deloitte.

“As it becomes increasingly clear that Canada’s economy will avoid a recession and that interest rate cuts are on the horizon, we may see spending increase at a faster pace than predicted in this outlook. 

“Overall, it seems the economic slump we’ve found ourselves in for much of the past year is slowly coming to an end – and we can look forward to better economic conditions by the second half of 2024.”

Deloitte expects the Canadian economy to grow by 2.9 per cent by 2025.

Employers in North America are far more positive about their outlook this year, according to a previous report from Deloitte released in March. Overall, 59 per cent of CFOs are optimistic about the current economy — up from 47 per cent in the fourth quarter of 2023.

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