The Trudeau government is raising the possibility of a recession for the first time early next year, we learn in its Fall Economic Update released Thursday.
In its “pessimistic” scenario, Ottawa predicts that Canada will enter “a mild recession in the first quarter of 2023,” the just under 100-page document reads.
“It is important to be frank with Canadians,” Finance Minister Chrystia Freeland said at a news conference. The reality is that the global economy is slowing down and there is a lot of uncertainty. “
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This forecast indicates that the unemployment rate will peak at 6.9% and GDP growth will plummet into negative territory (-0.9%) next year.
The Bank of Canada is trying to curb runaway inflation with sharp interest rate hikes since last March, which have the effect of slowing the economy.
According to its economic scenario, which it believes most likely, Ottawa still expects to avoid a recession next year, thanks to weak GDP growth of 0.7% in 2023.
Finance Minister Chrystia Freeland’s update includes new additional support for some Canadians to help them cope with rising cost of living.
The cost of these improvements amounts to $ 6 billion.
They mainly cater to students and workers (see below).
The federal government is also injecting billions, including 600 million this year, to improve its customer service. The past few months have revealed profound shortcomings in the provision of services by the federal public service, both in the processing of immigration applications and passports.
The liberal government claims it has been careful not to stoke the inflation fire with overspending.
“Government aid has been carefully designed to prevent inflation from escalating,” it reads.
The fact remains that the Trudeau government spent 45% of the additional revenue earned from its spring budget on inflation-related revenue.
In fact, while the Economic Update predicts about $ 6 billion in new spending this year, Ottawa has extended over $ 7 billion in a series of measures since last spring.
Minister Freeland believes he has found the right balance between help and caution.
“We had to find the balance between fiscal prudence and compassion,” Ms. Freeland said.
Robert Asselin, vice president of public policy for the Business Council of Canada, disagreed with this reading. According to him, the sums would have been better spent by reducing the deficit.
“His narrative on budgetary prudence is a bit rubbish,” affects this former economic adviser to Paul Martin and Justin Trudeau.
Expected deficits
2022-23 -> $ 36.4 billion
2023-24 -> $ 30.6 billion
2024-25 -> $ 25.4 billion
2025-26 -> $ 14.5 billion
2026-27 -> $ 3.4 billion
2028-28 -> Surplus of $ 4.4 billion
Ottawa provides billions in aid for workers and students
1- Help for low-income workers and students
Responding to requests from the NDP, the liberal government released the checkbook for low-income workers and students.
– $ 4 billion over six years to increase Canada Workers Benefit (CWB), which benefits nearly three million low-income Canadian workers. This sum will allow an employee earning $ 25,000 annually to receive upfront payments of $ 200 from ACT each quarter, plus an additional $ 600 at the end of the year.
– $ 2.7 billion over five years to permanently eliminate interest on all Canadian student loans and Canadian apprentice loans, including repayments. This will allow student borrowers to save an average of $ 410 per year.
2- Hello? Canadian passport?
Criticized by all sides in recent months for poor service delivery, the federal government will spend $ 1.6 billion trying to do better. The amount should allow:
– Speed up processing of work insurance and retirement security applications and speed up the release of payments.
– Reduce waiting times at Service Canada and Canada Revenue Agency call centers.
– Provide faster services to veterans
– Hire additional border service officials to reduce border pressure.
3- Resist the American wave
Americans have invested $ 369 billion and just as much upfront in loans to attract global investments that will allow them to make a 180-degree green turn, through the Inflation Reduction Act. To maintain its competitiveness, Canada must act quickly, he insists. economist Robert Asselin, vice president of the Business Council of Canada.
However, the government’s response so far has been “rather timid”, he worries. In its spring budget, Finance Canada announced $ 15 billion for the launch of the Canada Growth Fund, promising more concrete action on the economic upgrade. But the only news announced on Thursday is a new refundable tax credit for companies investing in clean technologies, such as solar, wind and hydro power generation systems, or even zero-emission industrial vehicles.
