Treasury Secretary Chrystia Freeland warned on Monday that Canadians can expect an economic slowdown in the coming months.
Speaking to executives at a local company in Gatineau, Que., Freeland said the road forward will be difficult even if inflation begins to ease.
“It’s important that as Deputy Prime Minister and Finance Minister, I tell people the truth about what’s in store for us,” she said in French.
“Our economy will slow down as the central bank has to fight inflation.”
While Freeland didn’t use the word recession, most consumers and businesses believe Canada will enter a recession, according to new Bank of Canada surveys.
The third-quarter business outlook and consumer expectations surveys released Monday show that more than half of the consumers surveyed believe there is at least a 50 percent chance of a recession. And nearly half of consumers say they are buying fewer and more sale items to cover living expenses.
Speaking to reporters after her speech Monday, Freeland said the coming months would be a “challenging economic time.”
“I’m not going to sugarcoat it and I’m not going to say we don’t have challenges ahead,” she said, adding that rising interest rates will have an impact as the Bank of Canada tries to rein in inflation.
The annual inflation rate was 7.0 percent in August, the latest figure available. Statistics Canada will release its latest inflation figures on Wednesday.
Freeland suggested that all countries are hit by the same economic downturn.
The International Monetary Fund (IMF) last week downgraded its outlook for the global economy for 2023, warning that next year will “feel like a recession for many” thanks to central bank reactions around the world.
The IMF, the credit agency for 190 countries, said Tuesday morning that global economic growth would be a meager 2.7 percent in 2023, compared with the 2.9 percent they had estimated in July. The global economy grew by 6 percent in 2021.
The IMF said the slowdown was being caused by Russia’s war in Ukraine, chronic inflationary pressures, punitive interest rates and the lingering fallout from the global pandemic.
“The worst is yet to come,” said IMF chief economist Pierre-Olivier Gourinchas.
Canada’s 2023 growth estimate has slipped to 1.5 percent, down three-tenths of a percentage point from the last estimate in July. Canada’s growth estimate for 2022, meanwhile, fell to 3.3 percent from July’s estimate of 3.4 percent.