Canada’s Economy Will Face Slowdown ‘Around the Corner,’ Freeland Says

Deputy Prime Minister and Minister of Finance Chrystia Freeland takes part in the Special Joint Committee on the Declaration of Emergency surrounding the government's use of the Emergencies Act in February, in Ottawa on June 14, 2022. (The Canadian Press/Justin Tang)

Deputy Prime Minister Chrystia Freeland says that Canadians will face more economic challenges “around the corner” as a result of rising interest rates.

“The impact that will have on people’s family budgets—some people are going to see their mortgage payments rise and that is a challenge,” Freeland told reporters in Gatineau, Que., on Oct. 17.

“I’m not going to sugarcoat it and I’m not going to claim that we don’t have some challenging months ahead. We do,” she added.

The Bank of Canada (BoC) yesterday released its 2022 third-quarter “Canadian Survey of Consumer Expectations,” which said most Canadians surveyed “expect a recession in the next 12 months.”

“Most consumers think the chance of a recession is at least 50%,” read the survey report. “This sentiment is broad-based across different groups.”

The BoC raised its key interest rate on Sept. 7 by 75 basis points, or 0.75 percent, to 3.25 percent, which is the bank’s highest rate since 2008.

“During interviews, several mentioned that Canada may already be in a recession—they think that the economy has not fully recovered from the pandemic and that high inflation and rising interest rates are making things worse,” the BoC said in its third-quarter report.

‘Headwinds Ahead’

Freeland said yesterday that both businesses and individuals will be impacted by the coming economic downturn, which she described as a “slowdown in economic activity.”

“That is going to continue,” she said.

“We need to be collectively aware that that is the challenge around the corner and we just need to be prepared for that,” she added.

Prime Minister Justin Trudeau addressed the issue on Oct.18, saying, “I think Canadians know that there are headwinds ahead.”

“We’ve seen rising interest rates, we’ve seen rising costs of living,” Trudeau told reporters on Parliament Hill on Oct. 18. “That’s why we’ve been acting concretely.”

The House of Commons unanimously passed legislation temporarily doubling GST rebates for low- and middle-income Canadians on Oct. 6.

The rebate hike was part of the Liberal government’s proposed inflation-relief plan, introduced in September, which includes up to $650 of annual dental coverage for children 12 years old or younger in low-income families that don’t already have coverage.

The Liberals’ inflation relief measures also include a one-time top-up worth $500 to the Canada Housing Benefit for Canadians who spend at least 30 percent of their income on rent.

Conservative leader Pierre Poilievre has criticized the federal government’s efforts to reduce inflation, saying they will only increase taxes and drive up living costs even further.

“The problem with spending more money as a solution to inflation is that it simply pours more gasoline on the inflationary fire,” he said during a Sept. 13 press conference in Ottawa.

The Canadian Press and Rahul Vaidyanath contributed to this report.