Mark Carney, the former Bank of Canada governor, told a Senate committee on Thursday that Canada is likely headed for a recession citing, “difficult economic times.”
Specifically, he said a recession is “most likely globally” and “probable in Canada,” citing economic slowdowns across Europe, the United Kingdom, and China.
“I would put it this way — I’m afraid it’s a bit like air travel these days,” he said. “We know where we’re headed, we just don’t know when we are going to get there, so there’s some uncertainty about the exact time.”
Carney thinks that Canada would “fare better” than many other countries and thinks the Canadian economy could bounce back faster because of the country’s “strong economic fundamentals.”
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The Canadian economist — who now works for a private investment fund — told a commerce Senate committee on Thursday that increased commodity prices and supply chain constraints are putting heavy pressures on Canadians.
Carney says China is “effectively in a recession now,” Europe is on the cusp, and the UK is already in one. He says the economy in the United States has “some momentum,” but that our southbound neighbours would be required to go into a recession before Canada’s inflation increase is fully controlled.
According to Carney, Canada will be in recession “at some point” next year for “at least a few quarters” of negative growth.
On the plus side, Carney had positive comments about the fundamentals of the Canadian economy and cited that our close ties with the US will help to “soften the blow” of the recession and that Canada’s strong financial sector and tight labour market could accelerate ourselves out of financial downturn compared to other global economies.
He said Canada’s job market is strong because of the country’s pandemic benefits (the Canada Emergency Wage Subsidy) which helped millions of Canadians keep their jobs, meaning we lost fewer jobs than other global markets.
“We can come out of this much stronger than others, but we have to be clear-eyed about what we’re heading into,” he said. Carney said Canada’s international trade agreements with other G7 counties will help the economy recover sooner.
Because the US is faring better than other countries, he said the strength of its economy could also support Canada’s recovery. “It’s a storm, not a hurricane,” he said. “That’s the way I would put it.”
At the end of his 12-minute discussion, Carney backed the Liberal’s fiscal approach from Finance Minister Chrystia Freeland and said the government’s initiative to focus on “targeted relief” is the most “appropriate stance” during periods of high inflation.
Earlier this week, Freeland admitted that Canada is facing some “difficult days” and said the Liberal government will reveal its fall economic update at a later date, which will be announced in the coming days.