The Canadian Economy will likely “remain stuck in neutral” throughout much of 2024, with lingering inflation, increasing business insolvencies, and a rise in mortgage delinquencies according to a Report by Deloitte!
A true recovery is dependent on the Bank of Canada’s response to inflation. After taking aggressive steps in 2022 to raise the key interest rate from near zero to 5%, signs of cooling inflation have prompted Deloitte to forecast interest rate cuts beginning as early as June. This aligns with expectations from most economists for rate cuts starting in June or July.
While the economy is expected to grow by a modest 1% this year, Deloitte forecasts stronger 2.9% growth in 2025. This optimism hinges on factors like ,softening inflation, the Bank of Canada’s anticipated rate cuts, and a steady flow of immigration to support demand.
Recent Statistics Canada data, showing 0.6 % GDP growth in January and a 0.4% for February, support these projections.
Deloitte emphasized the importance of rate cuts for a true economic recovery.
“Further, wage pressures continue to run well above inflation without any commensurate increase in productivity, and that is driving up unit labor costs for businesses and making it difficult to contain inflation,” the report said.
“To cope with softer demand and tighter credit conditions, businesses are increasingly delaying their investment plans, focusing more on maintenance and repair rather than expanding operations,” the report read.
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