Office of the Parliamentary Budget Officer
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PBO Releases Risk Scenario Analysis

Ottawa (Ontario), November 10, 2022

The Parliamentary Budget Officer (PBO) today released a Risk Scenario Analysis — November 2022 to help parliamentarians gauge potential economic and fiscal implications in the event of central banks over-tightening monetary policy. This risk was flagged in the PBO’s Economic and Fiscal Outlook – October 2022.

“The risk scenario in today’s report is one of many possible outcomes. I would stress that the scenario is not a most-likely forecast—it’s an illustrative scenario of one possible outcome,” said Yves Giroux, PBO. “Policymakers and international institutions have expressed concerns about monetary policy over-tightening and today’s report outlines some potential economic and fiscal impacts.”

The risk scenario analysis does not incorporate any new economic data released after September 30 or any fiscal measures incremental to the October Economic and Fiscal Outlook, such as measures included in the Government’s 2022 Fall Economic Statement.

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    {"id":"RP-2223-020-S","is_published":"2022-11-10T13:57:05.000000Z","release_date":"2022-11-10T14:00:00.000000Z","title_en":"Risk Scenario Analysis \u2014 November 2022","title_fr":"Analyse de sc\u00e9nario de risque \u2014 Novembre 2022","internal_id":"RP-2223-020-S","metadata":{"abstract_en":"This report provides a risk scenario analysis to help parliamentarians gauge potential economic and fiscal implications of central banks over-tightening monetary policy. **The scenario is not a most-likely forecast. It is an illustrative scenario of one possible outcome.**","abstract_fr":"Ce rapport propose une analyse de sc\u00e9nario de risque pour aider les parlementaires \u00e0 \u00e9valuer les possibles r\u00e9percussions \u00e9conomiques et financi\u00e8res d\u2019un resserrement excessif de la politique mon\u00e9taire par les banques centrales. **Le sc\u00e9nario ne constitue pas une pr\u00e9vision. Il ne montre qu\u2019une des issues possibles \u00e0 la situation.**","highlights":[{"content":{"en":"Our risk scenario assumes that the U.S. Federal Reserve and the Bank of Canada will continue to rapidly raise their policy interest rates to 5.25 per cent and 5.0 per cent, respectively, in early 2023 (100 basis points above our October outlook). We assume that the Federal Reserve and Bank of Canada will begin to lower their policy rates in early 2024.","fr":"Dans notre sc\u00e9nario de risque, nous supposons que la R\u00e9serve f\u00e9d\u00e9rale am\u00e9ricaine et la Banque du Canada continueront d\u2019augmenter rapidement leur taux directeur, de sorte qu\u2019il atteigne 5,25 % et 5,0 % respectivement au d\u00e9but de 2023 (100 points de base de plus que dans nos perspectives d\u2019octobre). Nous supposons qu\u2019elles commenceront \u00e0 abaisser leur taux au d\u00e9but de 2024."}},{"content":{"en":"With the over-tightening of monetary policy, real GDP in Canada begins to contract in the fourth quarter of 2022 and declines further over the course of 2023 in our risk scenario. Annual real GDP growth in 2023 and 2024 is -0.3 per cent and 1.3 per cent, respectively, which is 1.5 and 1.0 percentage points lower compared to our October outlook.","fr":"Compte tenu du resserrement excessif de la politique mon\u00e9taire pr\u00e9vu dans notre sc\u00e9nario de risque, le PIB r\u00e9el du Canada commence \u00e0 se contracter au quatri\u00e8me trimestre de 2022 et continue de diminuer en 2023. La croissance annuelle du PIB r\u00e9el en 2023 et en 2024 est de 0,3 % et 1,3 % respectivement, ce qui repr\u00e9sente une baisse de 1,5 et 1,0 point de pourcentage par rapport \u00e0 nos perspectives d\u2019octobre."}},{"content":{"en":"Under our risk scenario, employment growth essentially stalls in late 2022 and over the course of 2023. Employment falls below levels projected in our October outlook, resulting in a loss of 177,000 (net) jobs by the end of 2024. The unemployment rate rises to 6.2 per cent in early 2024 in our risk scenario, which is 0.5 percentage points above our October outlook.","fr":"Dans notre sc\u00e9nario de risque, la croissance de l\u2019emploi stagne essentiellement \u00e0 la fin de 2022 et en 2023. L\u2019emploi tombe sous les niveaux pr\u00e9vus dans nos perspectives d\u2019octobre, ce qui se traduit par une perte de 177 000 emplois (nets) d\u2019ici la fin de 2024. Le taux de ch\u00f4mage passe \u00e0 6,2 % au d\u00e9but de 2024 dans notre sc\u00e9nario de risque, soit 0,5 point de pourcentage de plus que ce que nous pr\u00e9voyions dans nos perspectives d\u2019octobre."}},{"content":{"en":"Due to weaker economic activity and higher interest rates in 2023 and 2024 under our risk scenario, the budgetary deficit reaches $42.9 billion in 2023-24 (1.5 per cent of GDP) and $36.5 billion in 2024-25 (1.3 per cent of GDP). Compared to our October outlook, the budgetary deficit is $15.6 billion higher per year, on average, over 2023-24 to 2027-28.","fr":"En raison du ralentissement de l\u2019activit\u00e9 \u00e9conomique et de la hausse des taux d\u2019int\u00e9r\u00eat, en 2023 et 2024 pr\u00e9vus dans notre sc\u00e9nario de risque, le d\u00e9ficit budg\u00e9taire s\u2019\u00e9l\u00e8ve \u00e0 42,9 milliards de dollars en 2023-2024 (1,5 % du PIB) et \u00e0 36,5 milliards en 2024-2025 (1,3 % du PIB). Par rapport \u00e0 nos perspectives d\u2019octobre, il est plus \u00e9lev\u00e9 de 15,6 milliards de dollars par ann\u00e9e, en moyenne, de 2023-2024 \u00e0 2027-2028."}},{"content":{"en":"Under our risk scenario, the federal debt-to-GDP ratio increases to 43.2 per cent of GDP in 2023-24 and remains elevated before gradually falling to 39.2 per cent in 2027-28. The debt service ratio (that is public debt charges relative to tax revenues) reaches 14.3 per cent in 2024-25 and then declines to 12.0 per cent in 2027-28.","fr":"Dans notre sc\u00e9nario de risque, le ratio de la dette f\u00e9d\u00e9rale au PIB augmente pour passer \u00e0 43,2 % du PIB en 2023-2024 et reste \u00e9lev\u00e9 avant de revenir graduellement \u00e0 39,2 % en 2027-2028. Le ratio du service de la dette (soit le rapport entre les frais de la dette publique et les recettes fiscales) atteint 14,3 % en 2024-2025 avant de retomber \u00e0 12,0 % en 2027-2028."}}]},"updated_at":"2022-11-10T13:57:05.000000Z","type":"RP","slug":"RP-2223-020-S--risk-scenario-analysis-november-2022--analyse-scenario-risque-novembre-2022","permalinks":{"en":{"website":"https:\/\/www.pbo-dpb.ca\/en\/publications\/RP-2223-020-S--risk-scenario-analysis-november-2022--analyse-scenario-risque-novembre-2022","preview":"https:\/\/www.pbo-dpb.ca\/en\/publications\/RP-2223-020-S--risk-scenario-analysis-november-2022--analyse-scenario-risque-novembre-2022"},"fr":{"website":"https:\/\/www.pbo-dpb.ca\/fr\/publications\/RP-2223-020-S--risk-scenario-analysis-november-2022--analyse-scenario-risque-novembre-2022","preview":"https:\/\/www.pbo-dpb.ca\/fr\/publications\/RP-2223-020-S--risk-scenario-analysis-november-2022--analyse-scenario-risque-novembre-2022"}},"artifacts":{"main":{"en":{"public":"https:\/\/distribution-a617274656661637473.pbo-dpb.ca\/1784db049839a6abc9fce1862c044808c8f5395a2e6cd4ff6bc72ed642de352b"},"fr":{"public":"https:\/\/distribution-a617274656661637473.pbo-dpb.ca\/4add25f0f3fe0524f9c433ba45ef4924dabde62e3e5d5e7f973ae656a4d43a70"}}},"coverpages":{"distribution":{"fr":{"small":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/9ba2db66a0231ab8aa5b2c0099153c6042de983e216631333fdbd030fee443a4","large":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/3caca905b6e0bb2962ed687fe19c6cc86a1090a6d695b4da233285a878bb7919","h150_png_optimized":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/3f6fa1760a0bae5d2a6d3edcab270fa53a490feb8e2d12f1de11d6ebfe3f3a7e","h150_webp":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/24b7f01db1ed2e1c05e4a4bf3855260440c9a2f9b0bc21dbe5d1295689d019c3","h300_png_optimized":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/b386a4acb137ce93d95c5a358bb89f1aa3ec86457664e9b9549510e0825ba487","h300_webp":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/3cebe4cb090ff42b371b22f59326e72a57591b65f30ec28d03598f32480052d2","h600_png_optimized":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/06c5f829ec5b71c436108ae2031e4d47400ddf6a28bfac56fe983426945cf640","h600_webp":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/19244a50c1cc10599289bd9f560870402a1ff345f376c67c23c2ee3b62fa45b3"},"en":{"small":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/864e05e30bbd443b983df6ce74adab5067394fe483ea07485cd980baa419e8ad","large":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/fb87d4f0ee7ef2867e8305574cac5ecfef7af2015a1ba90ceae30a5f78413daa","h150_png_optimized":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/0203f253d0c718aa7dd4f59961cce2266f702b91a880a4a1ef5ad47609d59bb7","h150_webp":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/df6b5342fbd6e3c834bdcede16ffd86a9f015d4425335d87cb995278bc326167","h300_png_optimized":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/1bb0219a6f866dec9f554e01e6d484ecd1c3718e2dfbc4ffae181a3e82571e1c","h300_webp":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/39d9221f1edfd01bd00c9fe70a99a207e66eeac8e5eab755c9c37b31cff16ce3","h600_png_optimized":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/2cf79e87b40ad197102eaeafb72b079efa16750e211bd59913dca52069867edb","h600_webp":"https:\/\/distribution-i696d61676573.pbo-dpb.ca\/2c5bb7701b5ea810495b8bef191eeacf5d1cb8b27de3e88fbe7da744d15081ab"}}},"bills":[],"bibtex":{"en":"@techreport{PBO-RP2223020S,\n author={Nahornick, Nora and Nicol, Caroline and Stanton, Jason and Behrend, Robert and Creighton, Mark and Kpekou Tossou, Rolande and Laurin, Marianne and Michalyshyn, Katarina and Vanderwees, Kaitlyn},\n title={Risk Scenario Analysis \\textemdash November 2022},\n institution={The Office of the Parliamentary Budget Officer},\n year=2022,\n \n address = \u0022Ottawa, ON\u0022\n}","fr":"@techreport{DPB-RP2223020S,\n author={Nahornick, Nora and Nicol, Caroline and Stanton, Jason and Behrend, Robert and Creighton, Mark and Kpekou Tossou, Rolande and Laurin, Marianne and Michalyshyn, Katarina and Vanderwees, Kaitlyn},\n title={Analyse de sc\\\u0027{e}nario de risque \\textemdash Novembre 2022},\n institution={Bureau du directeur parlementaire du budget},\n year=2022,\n \n address = \u0022Ottawa, ON\u0022\n}"}}