Whether Canada’s economy tips into a recession depends largely on how sticky inflation ends up being, according to Chrystia Freeland's fall economic statement.
Canada is ready to weather the harsh winter winds cooling the global economy, despite being set for “significantly weaker growth,” according to the government’s fall economic statement on Thursday.
The update from Chrystia Freeland, the Liberal finance minister and deputy prime minister, keeps the government’s fiscal “powder dry,” reserving major spending items for the next federal budget in the spring. But it contains a few targeted measures such as boosts for low-wage workers and student loan interest relief to support Canadians struggling with inflation and interest rates.
Read more: Student loan interest relief and more: What’s new in the fall economic statement?
It is that very risk of stubborn and prolonged inflation — and the monetary tightening needed to stamp it out — that informs Ottawa’s fiscal path.
Many of the government’s projections are based on surveys of private-sector economists conducted in September 2022. The update makes clear that since that time, economic growth prospects have worsened across the globe.
Freeland focused on “uncertain times” in the global economy, driven by Russia’s invasion of Ukraine and “aftershocks” from the COVID-19 pandemic in the update. She pointed to these external factors as driving economies around the world into decline and said Canada will not be immune.
“Canada cannot avoid the global slowdown to come, any more than we could have prevented COVID from reaching our shores once it had begun to infect the world,” the document reads.