Ontario, Quebec, and British Columbia will face the strongest economic headwinds next year and through 2024. That’s according to economists at CIBC expecting high household debt, real estate downturns, and tight labour conditions to strain Canada’s three most populous provinces.
The bank sees real GDP growth slowing to 0.6 per cent nationwide next year, following a 3.1 per cent gain in 2022. Ontario’s economic growth forecast for 2023 is the weakest among the provinces, at 0.3 per cent year-over-year. Saskatchewan is predicted to be strongest, at 1.6 per cent.
“The Canadian economy is facing plenty of headwinds at the moment,” economists Andrew Grantham and Karyne Charbonneau wrote in a report. “However, not all provinces will be impacted equally by these risks.”
For Ontario, they say 2022 was supposed to show above average growth as pandemic-led supply chain problems faded for key sectors like the auto industry. However, rapidly rising interest rates are now weighing on the province’s sizeable housing sector, pushing up borrowing costs for highly indebted households.
It’s a similar story in B.C., where the economists also note a “rapid adjustment” in home sales and the level of prices, in concert with rising interest rates.
“After years of chasing higher house prices by taking on larger mortgages, households in B.C. and Ontario have higher debt levels, and by extension pay the most interest to service that debt,” Grantham and Charbonneau wrote.
“With interest rates now rising on revolving debt, and with term debt coming due having to be refinanced at higher rates, households in these provinces will find their ability to spend on other items being squeezed particularly hard.”
CIBC says labour markets have tightened in all provinces compared to conditions three years ago, led by Quebec. Atlantic provinces were found to have the most favourable conditions, partially due to a high proportion of seasonal jobs.
The bank expects the strongest real GDP growth to come from the commodity-rich provinces of Alberta and Saskatchewan, owing in part to higher global oil and gas prices driven by Russia’s war in Ukraine.
CIBC says Atlantic provinces continue to benefit from an influx of new residents fleeing unaffordable housing markets in Ontario and B.C. Ontario recently recorded the largest outflow of residents since Statistics Canada started collecting the data.
“This trend, which started during the pandemic, shows no sign of slowing,” Grantham and Charbonneau wrote. “The work-from-home revolution has opened up options to many people across the country, who are no longer tied to a location because of work.”
Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.
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Ontario, B.C., Quebec to be ‘squeezed particularly hard’ as economy weakens: CIBC - Yahoo Sports
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