Canada’s slow growth trajectory is expected to persist for much of 2024, with no indications of a turnaround anticipated until the fourth quarter, according to new research from The Conference Board of Canada. Real GDP growth is forecast to increase by just 0.8 per cent in 2024.

“Although interest rate cuts are projected to arrive mid-year, the central bank will likely exercise caution in their rate adjustments to ensure long-term stability amidst inflation concerns,” said Ted Mallett, Director, Economic Forecasting at The Conference Board of Canada. “While Canada should expect a slow recovery this year, momentum will pick up in 2025, with growth forecast to rise by 2.3 per cent.”

Housing markets continue to be a focal point of policy discussions and initiatives across all levels of government. Efforts to address the critical housing supply shortage and affordability challenges are underway, but progress remains hampered by slow policy reforms, labour constraints and high interest rates.

Following a year of unforeseen growth in 2023, the U.S. economy is expected to lose momentum this year. Despite a surge in employment growth, a cooler labour market is forecast for the year ahead as demand for labour moderates. While this slowdown is expected to temper demand and spending throughout the year, consumption will remain resilient and continue to support economic growth. Real GDP growth will only fall slightly from last year.

The resilience of the world’s major economies is helping to ease some fears of a global recession, but not all. As worries about inflation fade to the background, concerns about growth take prominence. In particular, the European area faces higher recession risk due to greater exposure to the war in Ukraine which has pushed up energy and food prices. China’s performance continues to be lackluster as the country struggles with a collapsing property market, weak household confidence, stalled investment, and high youth unemployment.

The labour market in Canada faces its own challenges, as high interest rates curb economic expansion and labour demand. Due to weak hiring activity, employment growth is struggling to match labour force growth, leading to an uptick in the unemployment rate. Moreover, pressures on labour supply are expected to heighten over the medium term, resulting from the retirement of baby boomers and reduced inflows of temporary residents.

Canada’s trade sector offers a brighter outlook, with exports set to outpace imports for another year. Imports will be constrained by a consumer sector burdened by debt, while export activity will be fueled by energy products. Exports will drive growth in Canada throughout the forecast period.

Canada’s energy sector is poised to see stronger growth based on the anticipated completion of the Trans Mountain Expansion project and by recently resumed operations at the Terra Nova oil platform after years of inactivity. Looking further ahead, real GDP growth in the sector is projected to moderate over the medium term due to a lack of pipeline capacity expansions and federal climate policies.

With the anticipated interest rate cuts and subsiding recession fears, business investment is expected to strengthen as the year unfolds, signaling an inflection point for the economy. Additionally, substantial government investment in the auto sector’s transition to battery power will contribute to this momentum. However, it is uncertain whether these early investments will spark a larger productivity rebound in Canada.

About The Conference Board of Canada

The Conference Board of Canada is the country’s leading independent research organization. Since 1954, The Conference Board of Canada has been providing research that supports evidence-based decision making to solve Canada’s toughest problems.