Economists at the bank expect Canadian GDP to fall more than three percentage points next year amid deteriorating financial conditions
“We believe the odds of a North American recession are greater than even,” said Sal Guatieri, senior economist at BMO Capital Markets, in aEconomists at the bank expect Canadian gross domestic product to fall more than three percentage points next year amid deteriorating financial conditions brought on by a crumbling housing market, a weak stock market and more interest rate increases. Lower prices of oil and gas and other commodities will also take a toll on Canada’s growth. In the U.S.
Meanwhile, interest rate hikes will continue to cause pain. BMO thinks the Bank of Canada will keep raising rates more than originally anticipated, bringing them up another 75 basis points before pausing at 4.5 per cent for the benchmark. The U.S. Federal Reserve will follow a similar path, with rates peaking between 4.75 and five per cent.
To add to the pain, a low Canadian dollar could further fuel price increases. BMO expects the loonie to sink even more, hitting 72.5 cents U.S. by the end of 2023. There are other geopolitical risks to watch out for, too, including the continued conflict in Ukraine and strained ties between the U.S. and China, BMO said. Added together, it signals North America is walking straight into a downturn.
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