Economy in 2023 What can we expect?
New year, new hope of a brighter horizon. Right? Talking about economics and the predictions made by experts in the field, we can’t guarantee that the horizon is going to be any less dark than in the previous year. All over the world, the economic scenario was a tough one in 2022, with many countries reaching their highest rates of inflation in decades, with the Ukraine war and the pandemic effects continuously affecting the the markets.
Here in Canada, the population felt this directly in their pockets. In June, the country’s inflation rate peaked as soaring gas prices pushed the cost of living up 8.1% compared with a year ago—its hottest pace in nearly 40 years. Buying food became a lot more expensive and with high interest rates buying a house is a dream out of reach, or postponed indefinitely, for most people. Making ends meet has been tough for many since our purchasing power seemed to decrease month by month.
So, what can we expect from 2023? Well, searching for some answers and maybe directions, in Milénio Stadium’s first edition of the year, we interviewed Ted Mallett, the Director of Economic Forecasting from the Conference Board of Canada. He is a nationally recognized economist with more than three decades of experience in economic policy analysis and forecasting.
In Mallett’s vision, a recession in Canada is inevitable but he predicts it is going to be milder than past ones. According to him, some relief in interest rates can come in late fall and about inflation, even though the rate is predicted to fall, it will only reach the expected level in 2024.
We’re now entering a year where uncertainty still rules the economic game, globally and nationally speaking, and the best universal advice, according to the economist, is to be aware of your income and spending patterns—and the risks associated with each.
Milénio Stadium: A lot of economic exp-erts have predicted that a recession is inevitable in Canada’s economic scenario in 2023. How hard is this going to affect us?
Ted Mallett: Our modeling gives a 90% chance of recession in Canada. At the very least, growth will slow to a crawl for much of the year—carrying on a trend that has been going on since the middle of 2022. We expect the depth of the decline to be milder than most past recessions and growth for the year will remain positive, but barely (+0.6%). Consumer spending already took a big hit in 2022Q3.
MS: Will Inflation continues to dominate in 2023? Can we expect more hiking rates coming from the Bank of Canada?
TM: Price increases are already beginning to settle, and once we pass the one-year anniversary of the war in Ukraine, year-over-year price changes will look far more normal. CPI inflation was an expected 6.8% last year and we forecast 3.8% in 2023 and falling further to 2.4% in 2024. We are seeing a likely topping off of interest rates early this year and perhaps some interest rate relief in late fall.
MS: A survey conducted by Nanos Research found that almost half of Canadians were increasingly concerned about their finances, because they felt they had worsened over the past year. Is this going to be a persisted reality for most of the population this year?
TM: We are coming out of a period of three years marked by pandemic and war. It is no surprise that people are concerned with family finances. The sooner that inflation can be brought down—hopefully at minimal cost in employment conditions—the more likely that people can once again plan ahead with confidence.
MS: What are the best tips you have for us to navigate these turbulent and uncertain economic periods? Is this a good time to invest, to buy a house, to simply save money?
TM: Everybody is different, but the best universal advice is to be aware of your income and spending patterns—and the risks associated with each.
MS: Worldwide, what will the economy look like this year? How is this endless war in Ukraine going to keep affecting the global economy?
TM: There are still many uncertainties on how the war will play out for Ukraine, Russia and the world economy. While either side may collapse, the possibility of a drawn-out conflict is still there too. The world economy, though, is adapting to new trade patterns and pricing as already stabilizing. That will continue as long as there are not any dramatic escalations.
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