Economic and Fiscal Outlook – October 2022
This report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.
Following a strong performance in the first half, with the tightening of monetary policy, we expect growth in the Canadian economy to slow considerably in the second half of 2022 as consumer spending downshifts and residential investment continues to decline. We project real GDP growth to remain weak through 2023 before rebounding somewhat in 2024.
With CPI inflation solidly on track to return to its 2% target, we expect the Bank of Canada to lower the policy interest rate to its neutral level of 2.5% by the end of 2024.
For the current fiscal year 2022-23, we project the deficit to decline to $25.8 billion (0.9% of GDP) under status quo policy and assuming no new measures are introduced and existing temporary measures sunset as scheduled, the deficit is projected to decline further, reaching $3.1 billion (0.1% of GDP) in 2027-28.
With the synchronized tightening of monetary policy by major central banks around the world to reduce high inflation, there is a risk of a more severe global slowdown, which would negatively affect the Canadian economy and federal finances.
Parliamentary Budget Officer