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01/13/2023

Bank economists see mild recession likely ahead despite surprising resilience

The economy could be headed for the mythical soft landing that policymakers have long aimed for before

Big bank economists say the surprisingly resilient economy is likely headed for a mild slowdown in the year ahead, but that recent events show how difficult it is to predict the future.

Speaking at an Economic Club of Canada panel, Scotiabank chief economist Jean-Francois Perrault said the economy could be headed for the mythical soft landing that policymakers have long aimed for before but have never really achieved.

TD chief economist Beata Caranci said that while the bank is forecasting about 100,000 job losses this year, it's much less than the 300,000 that would normally occur in a recession.

Caranci said emerging factors like the reopening of the Chinese economy could however push inflation higher and force rates to stay higher for longer, which would worsen the economic hit.

RBC chief economist Craig Wright said the bank is sticking to its forecast of a recession that it's been predicting since last July, as a number of long-term tailwinds including free trade, cheap credit and low-cost labour, reverse.

Wright however expects the slowdown, purposefully imposed through interest rates, will do its job and have inflation back to the Bank of Canada's target range by the end of the year.

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