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Archived - Economic Overview

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In many ways, the Canadian economy is doing well. Our unemployment rate is near its record low, 830,000 more Canadians are employed compared to when COVID-19 first hit, and Canada's economic growth was the strongest in the G7 over the last year.

At the same time, many Canadians are faced with real affordability challenges, and are feeling the effects of higher grocery prices and housing costs. While inflation has fallen in Canada for eight straight months, it remains elevated—both in Canada and around the world. For many advanced economies, interest rates have risen to their highest levels in more than 15 years. This is resulting in slowing economic growth, both in Canada and around the world. The rapid rise in interest rates has also led to turmoil in some parts of the global banking system and volatility in global financial markets, highlighting the considerable uncertainty about how economic conditions will evolve going forward.

Canada is well positioned to navigate these turbulent times. Our economy entered 2023 on a better footing than most of our peers, and with strong economic fundamentals, including robust population growth, a strong labour market, and a well-regulated and well-capitalized financial system, Canada will be able to weather a global economic slowdown.

Canada's strength and resilience in the face of global economic challenges has been underpinned by steps the government has taken since 2015 to support Canadians and build an economy that creates good jobs and opportunities:

Economic Overview
Text version

People

By investing in our public health care system, making childcare more affordable, and reinforcing Canada's social safety net, including enhancing supports for children and seniors.

Growth

By investing in infrastructure, supporting investment in Canada's clean economy, and helping Canadian businesses grow and create jobs.

Jobs 

By helping workers acquire the skills they need, and helping our lowest-paid —and often most essential —workers and their families achieve a good standard of living.

Communities

By investing in infrastructure, more affordable housing, public transit, and broadband.

Since 2015, close to 2.7 million fewer Canadians are living in poverty, income inequality has continued to fall, the labour force participation rate for women aged 15 to 64 years is at record highs, and young Canadians have access to a greater number of good-paying jobs than before the pandemic. Significant investments in infrastructure and in the capacity of the Canadian economy will continue to benefit Canadians for decades.

A More Inclusive Economy: Progress Since 2015
  • 2.7 million fewer Canadians are living in poverty, a 56 per cent decrease;

  • Income inequality has declined by 11 per cent;

  • The gender wage gap is getting smaller, having decreased by 12 per cent;

  • Women are closing the labour force participation gap, which has decreased by 28 per cent; and,

  • More young people have good jobs, with the youth unemployment rate down by 22 per cent.

In the face of a rapidly changing global economic landscape, there is more work to be done to build a more sustainable and prosperous future for Canadians.

In the years to come, Canada will contend with two intertwined global economic shifts: first, the accelerating global race to build net-zero economies and the industries of tomorrow; and second, a realignment of global trade patterns as democracies move to friendshore their economies by limiting their strategic economic dependence on countries like Russia and China.

While these two global shifts represent significant economic opportunities for Canadian workers and businesses, significant investment will be required to capitalize on them, from both the private and the public sectors. To support this, Budget 2023 takes substantial action to mobilize private investment in building Canada's clean economy. The goal of these investments is to grow Canada's economic capacity in the industries of the future, create good careers, and usher in a new generation of prosperity for all Canadians, while simultaneously reducing Canada's emissions and strengthening our essential trading relationships.

Moreover, at a time of elevated global inflation, investing in Canada's long-term prosperity must be balanced with the need to avoid exacerbating inflation.

Against this backdrop, the government is taking a responsible, balanced approach to fiscal management: supporting the most vulnerable Canadians, strengthening our public health system, and investing in Canada's future prosperity while preserving Canada's long-term fiscal sustainability. Canada's enviable fiscal position—the lowest net debt and deficit as a share of gross domestic product (GDP) in the G7—means we can afford to make these essential investments. Over time, the growing returns of these essential investments will further enhance Canada's economic prospects.

1. Recent Economic Developments

Canada's Recovery Has Created the Strongest Job Market in Decades

Canada's economy is now 103 per cent the size it was before the pandemic, marking the fastest recovery of the last four recessions, and the second strongest recovery in the G7 (Chart 1). Throughout 2022, our economy demonstrated sustained strength, with Canada posting the fastest growth in the G7 over the past year (Chart 2). Resilient household and business finances and strong population growth, supported by the government's COVID-19 Economic Response Plan and Immigration Levels Plan, underpinned this strong economic performance.

Chart 1
Real GDP Recovery From the Pandemic in G7 Economies
Chart 1: Real GDP Recovery From the Pandemic in G7 Economies

Note: Last data point is 2022Q4.

Sources: Statistics Canada; Haver Analytics.

Text version
  Canada Minimum of Other G7 Range of Other G7 Maximum of Other G7
2019
Q4
100.0 100.0 0.0 100.0
2020
Q1
97.9 94.2 6.2 100.4
2020
Q2
87.2 76.9 15.5 92.4
2020
Q3
95.0 89.7 7.9 97.6
2020
Q4
97.1 90.8 8.7 99.5
2021
Q1
98.3 89.7 10.3 100.0
2021
Q2
97.8 95.6 6.1 101.7
2021
Q3
99.2 97.3 5.1 102.4
2021
Q4
100.8 98.9 5.3 104.1
2022
Q1
101.4 99.3 4.4 103.7
2022
Q2
102.3 99.4 4.1 103.5
2022
Q3
102.9 99.2 5.1 104.3
2022
Q4
102.9 99.2 5.8 105.1
Chart 2
Real GDP Growth in G7 Economies, 2021Q4 to 2022Q4

Chart 2: Real GDP Growth in G7 Economies, 2021Q4 to 2022Q4

Note: The growth rate shown is the percentage change in real GDP from 2021Q4 to 2022Q4.

Sources: Statistics Canada; Haver Analytics.

Text version
  Real GDP Growth
U.K. 0.4
Japan 0.4
France 0.5
U.S. 0.9
Germany 0.9
Italy 1.4
Canada 2.1

Canada's strong recovery has supported the strongest labour market in several decades. About 830,000 more Canadians are employed compared to the pre-pandemic period, and at just 5 per cent, the unemployment rate is near its record low of 4.9 per cent (Chart 3).

Chart 3
Unemployment Rate
Chart 3: Unemployment Rate

Note: Last data point is February 2023.

Source: Statistics Canada

Text version
  Unemployment Rate Recessions Current Rate (5.0%)
Jan-1976 7.1 0.0 5.0
Feb-1976 7.0 0.0 5.0
Mar-1976 6.7 0.0 5.0
Apr-1976 6.8 0.0 5.0
May-1976 6.9 0.0 5.0
Jun-1976 6.9 0.0 5.0
Jul-1976 7.4 0.0 5.0
Aug-1976 7.1 0.0 5.0
Sep-1976 7.0 0.0 5.0
Oct-1976 7.4 0.0 5.0
Nov-1976 7.4 0.0 5.0
Dec-1976 7.5 0.0 5.0
Jan-1977 7.6 0.0 5.0
Feb-1977 7.9 0.0 5.0
Mar-1977 7.8 0.0 5.0
Apr-1977 7.9 0.0 5.0
May-1977 7.8 0.0 5.0
Jun-1977 7.8 0.0 5.0
Jul-1977 8.1 0.0 5.0
Aug-1977 8.2 0.0 5.0
Sep-1977 8.3 0.0 5.0
Oct-1977 8.4 0.0 5.0
Nov-1977 8.5 0.0 5.0
Dec-1977 8.5 0.0 5.0
Jan-1978 8.3 0.0 5.0
Feb-1978 8.3 0.0 5.0
Mar-1978 8.5 0.0 5.0
Apr-1978 8.4 0.0 5.0
May-1978 8.6 0.0 5.0
Jun-1978 8.4 0.0 5.0
Jul-1978 8.3 0.0 5.0
Aug-1978 8.4 0.0 5.0
Sep-1978 8.4 0.0 5.0
Oct-1978 8.2 0.0 5.0
Nov-1978 8.3 0.0 5.0
Dec-1978 8.3 0.0 5.0
Jan-1979 8.2 0.0 5.0
Feb-1979 8.0 0.0 5.0
Mar-1979 7.9 0.0 5.0
Apr-1979 8.0 0.0 5.0
May-1979 7.6 0.0 5.0
Jun-1979 7.4 0.0 5.0
Jul-1979 7.2 0.0 5.0
Aug-1979 7.1 0.0 5.0
Sep-1979 7.0 0.0 5.0
Oct-1979 7.2 0.0 5.0
Nov-1979 7.2 0.0 5.0
Dec-1979 7.2 0.0 5.0
Jan-1980 7.5 0.0 5.0
Feb-1980 7.6 15.0 5.0
Mar-1980 7.6 15.0 5.0
Apr-1980 7.7 15.0 5.0
May-1980 7.8 15.0 5.0
Jun-1980 7.7 15.0 5.0
Jul-1980 7.6 0.0 5.0
Aug-1980 7.6 0.0 5.0
Sep-1980 7.3 0.0 5.0
Oct-1980 7.3 0.0 5.0
Nov-1980 7.2 0.0 5.0
Dec-1980 7.3 0.0 5.0
Jan-1981 7.4 0.0 5.0
Feb-1981 7.4 0.0 5.0
Mar-1981 7.4 0.0 5.0
Apr-1981 7.1 0.0 5.0
May-1981 7.2 0.0 5.0
Jun-1981 7.2 0.0 5.0
Jul-1981 7.2 15.0 5.0
Aug-1981 7.1 15.0 5.0
Sep-1981 8.1 15.0 5.0
Oct-1981 8.3 15.0 5.0
Nov-1981 8.3 15.0 5.0
Dec-1981 8.7 15.0 5.0
Jan-1982 8.6 15.0 5.0
Feb-1982 8.9 15.0 5.0
Mar-1982 9.3 15.0 5.0
Apr-1982 9.8 15.0 5.0
May-1982 10.3 15.0 5.0
Jun-1982 11.1 15.0 5.0
Jul-1982 11.9 15.0 5.0
Aug-1982 12.0 15.0 5.0
Sep-1982 12.4 15.0 5.0
Oct-1982 12.9 15.0 5.0
Nov-1982 12.9 0.0 5.0
Dec-1982 13.1 0.0 5.0
Jan-1983 12.7 0.0 5.0
Feb-1983 12.7 0.0 5.0
Mar-1983 12.5 0.0 5.0
Apr-1983 12.4 0.0 5.0
May-1983 12.4 0.0 5.0
Jun-1983 12.4 0.0 5.0
Jul-1983 11.9 0.0 5.0
Aug-1983 11.7 0.0 5.0
Sep-1983 11.4 0.0 5.0
Oct-1983 11.3 0.0 5.0
Nov-1983 11.3 0.0 5.0
Dec-1983 11.3 0.0 5.0
Jan-1984 11.3 0.0 5.0
Feb-1984 11.3 0.0 5.0
Mar-1984 11.3 0.0 5.0
Apr-1984 11.5 0.0 5.0
May-1984 11.7 0.0 5.0
Jun-1984 11.3 0.0 5.0
Jul-1984 11.2 0.0 5.0
Aug-1984 11.3 0.0 5.0
Sep-1984 11.8 0.0 5.0
Oct-1984 11.3 0.0 5.0
Nov-1984 11.4 0.0 5.0
Dec-1984 11.1 0.0 5.0
Jan-1985 10.6 0.0 5.0
Feb-1985 10.8 0.0 5.0
Mar-1985 11.0 0.0 5.0
Apr-1985 10.8 0.0 5.0
May-1985 10.6 0.0 5.0
Jun-1985 10.7 0.0 5.0
Jul-1985 10.4 0.0 5.0
Aug-1985 10.3 0.0 5.0
Sep-1985 10.2 0.0 5.0
Oct-1985 10.3 0.0 5.0
Nov-1985 10.3 0.0 5.0
Dec-1985 10.1 0.0 5.0
Jan-1986 9.8 0.0 5.0
Feb-1986 9.9 0.0 5.0
Mar-1986 9.8 0.0 5.0
Apr-1986 9.7 0.0 5.0
May-1986 9.5 0.0 5.0
Jun-1986 9.6 0.0 5.0
Jul-1986 9.6 0.0 5.0
Aug-1986 9.6 0.0 5.0
Sep-1986 9.5 0.0 5.0
Oct-1986 9.4 0.0 5.0
Nov-1986 9.4 0.0 5.0
Dec-1986 9.5 0.0 5.0
Jan-1987 9.5 0.0 5.0
Feb-1987 9.5 0.0 5.0
Mar-1987 9.4 0.0 5.0
Apr-1987 9.2 0.0 5.0
May-1987 8.9 0.0 5.0
Jun-1987 8.9 0.0 5.0
Jul-1987 8.7 0.0 5.0
Aug-1987 8.6 0.0 5.0
Sep-1987 8.4 0.0 5.0
Oct-1987 8.3 0.0 5.0
Nov-1987 8.2 0.0 5.0
Dec-1987 8.0 0.0 5.0
Jan-1988 8.1 0.0 5.0
Feb-1988 7.8 0.0 5.0
Mar-1988 7.8 0.0 5.0
Apr-1988 7.7 0.0 5.0
May-1988 7.8 0.0 5.0
Jun-1988 7.6 0.0 5.0
Jul-1988 7.8 0.0 5.0
Aug-1988 7.8 0.0 5.0
Sep-1988 7.8 0.0 5.0
Oct-1988 7.8 0.0 5.0
Nov-1988 7.8 0.0 5.0
Dec-1988 7.5 0.0 5.0
Jan-1989 7.5 0.0 5.0
Feb-1989 7.6 0.0 5.0
Mar-1989 7.5 0.0 5.0
Apr-1989 7.8 0.0 5.0
May-1989 7.7 0.0 5.0
Jun-1989 7.5 0.0 5.0
Jul-1989 7.5 0.0 5.0
Aug-1989 7.3 0.0 5.0
Sep-1989 7.3 0.0 5.0
Oct-1989 7.2 0.0 5.0
Nov-1989 7.5 0.0 5.0
Dec-1989 7.7 0.0 5.0
Jan-1990 7.9 0.0 5.0
Feb-1990 7.7 0.0 5.0
Mar-1990 7.3 0.0 5.0
Apr-1990 7.6 15.0 5.0
May-1990 7.8 15.0 5.0
Jun-1990 7.6 15.0 5.0
Jul-1990 7.9 15.0 5.0
Aug-1990 8.1 15.0 5.0
Sep-1990 8.5 15.0 5.0
Oct-1990 8.8 15.0 5.0
Nov-1990 9.1 15.0 5.0
Dec-1990 9.5 15.0 5.0
Jan-1991 9.8 15.0 5.0
Feb-1991 10.2 15.0 5.0
Mar-1991 10.5 15.0 5.0
Apr-1991 10.3 15.0 5.0
May-1991 10.2 15.0 5.0
Jun-1991 10.5 15.0 5.0
Jul-1991 10.5 15.0 5.0
Aug-1991 10.5 15.0 5.0
Sep-1991 10.3 15.0 5.0
Oct-1991 10.3 15.0 5.0
Nov-1991 10.4 15.0 5.0
Dec-1991 10.3 15.0 5.0
Jan-1992 10.4 15.0 5.0
Feb-1992 10.5 15.0 5.0
Mar-1992 10.9 15.0 5.0
Apr-1992 10.7 15.0 5.0
May-1992 10.9 0.0 5.0
Jun-1992 11.4 0.0 5.0
Jul-1992 11.3 0.0 5.0
Aug-1992 11.7 0.0 5.0
Sep-1992 11.6 0.0 5.0
Oct-1992 11.4 0.0 5.0
Nov-1992 12.1 0.0 5.0
Dec-1992 11.7 0.0 5.0
Jan-1993 11.2 0.0 5.0
Feb-1993 11.0 0.0 5.0
Mar-1993 11.2 0.0 5.0
Apr-1993 11.6 0.0 5.0
May-1993 11.6 0.0 5.0
Jun-1993 11.7 0.0 5.0
Jul-1993 11.6 0.0 5.0
Aug-1993 11.2 0.0 5.0
Sep-1993 11.5 0.0 5.0
Oct-1993 11.3 0.0 5.0
Nov-1993 11.2 0.0 5.0
Dec-1993 11.4 0.0 5.0
Jan-1994 11.4 0.0 5.0
Feb-1994 11.1 0.0 5.0
Mar-1994 10.6 0.0 5.0
Apr-1994 10.9 0.0 5.0
May-1994 10.7 0.0 5.0
Jun-1994 10.3 0.0 5.0
Jul-1994 10.1 0.0 5.0
Aug-1994 10.2 0.0 5.0
Sep-1994 10.1 0.0 5.0
Oct-1994 10.0 0.0 5.0
Nov-1994 9.7 0.0 5.0
Dec-1994 9.6 0.0 5.0
Jan-1995 9.6 0.0 5.0
Feb-1995 9.6 0.0 5.0
Mar-1995 9.7 0.0 5.0
Apr-1995 9.5 0.0 5.0
May-1995 9.5 0.0 5.0
Jun-1995 9.5 0.0 5.0
Jul-1995 9.6 0.0 5.0
Aug-1995 9.5 0.0 5.0
Sep-1995 9.2 0.0 5.0
Oct-1995 9.3 0.0 5.0
Nov-1995 9.2 0.0 5.0
Dec-1995 9.4 0.0 5.0
Jan-1996 9.4 0.0 5.0
Feb-1996 9.5 0.0 5.0
Mar-1996 9.6 0.0 5.0
Apr-1996 9.3 0.0 5.0
May-1996 9.2 0.0 5.0
Jun-1996 9.8 0.0 5.0
Jul-1996 9.7 0.0 5.0
Aug-1996 9.4 0.0 5.0
Sep-1996 9.9 0.0 5.0
Oct-1996 9.9 0.0 5.0
Nov-1996 9.9 0.0 5.0
Dec-1996 9.7 0.0 5.0
Jan-1997 9.5 0.0 5.0
Feb-1997 9.5 0.0 5.0
Mar-1997 9.3 0.0 5.0
Apr-1997 9.4 0.0 5.0
May-1997 9.4 0.0 5.0
Jun-1997 9.1 0.0 5.0
Jul-1997 8.9 0.0 5.0
Aug-1997 8.9 0.0 5.0
Sep-1997 8.8 0.0 5.0
Oct-1997 8.9 0.0 5.0
Nov-1997 8.9 0.0 5.0
Dec-1997 8.5 0.0 5.0
Jan-1998 8.8 0.0 5.0
Feb-1998 8.6 0.0 5.0
Mar-1998 8.4 0.0 5.0
Apr-1998 8.3 0.0 5.0
May-1998 8.3 0.0 5.0
Jun-1998 8.4 0.0 5.0
Jul-1998 8.3 0.0 5.0
Aug-1998 8.1 0.0 5.0
Sep-1998 8.2 0.0 5.0
Oct-1998 8.0 0.0 5.0
Nov-1998 8.0 0.0 5.0
Dec-1998 8.1 0.0 5.0
Jan-1999 7.9 0.0 5.0
Feb-1999 7.9 0.0 5.0
Mar-1999 7.9 0.0 5.0
Apr-1999 8.2 0.0 5.0
May-1999 7.9 0.0 5.0
Jun-1999 7.6 0.0 5.0
Jul-1999 7.6 0.0 5.0
Aug-1999 7.4 0.0 5.0
Sep-1999 7.5 0.0 5.0
Oct-1999 7.2 0.0 5.0
Nov-1999 6.9 0.0 5.0
Dec-1999 6.8 0.0 5.0
Jan-2000 6.8 0.0 5.0
Feb-2000 6.9 0.0 5.0
Mar-2000 6.9 0.0 5.0
Apr-2000 6.7 0.0 5.0
May-2000 6.6 0.0 5.0
Jun-2000 6.7 0.0 5.0
Jul-2000 6.8 0.0 5.0
Aug-2000 7.0 0.0 5.0
Sep-2000 6.9 0.0 5.0
Oct-2000 7.0 0.0 5.0
Nov-2000 6.9 0.0 5.0
Dec-2000 6.8 0.0 5.0
Jan-2001 6.9 0.0 5.0
Feb-2001 7.0 0.0 5.0
Mar-2001 7.1 0.0 5.0
Apr-2001 7.1 0.0 5.0
May-2001 7.0 0.0 5.0
Jun-2001 7.2 0.0 5.0
Jul-2001 7.1 0.0 5.0
Aug-2001 7.2 0.0 5.0
Sep-2001 7.2 0.0 5.0
Oct-2001 7.3 0.0 5.0
Nov-2001 7.5 0.0 5.0
Dec-2001 8.1 0.0 5.0
Jan-2002 8.0 0.0 5.0
Feb-2002 7.9 0.0 5.0
Mar-2002 7.9 0.0 5.0
Apr-2002 7.7 0.0 5.0
May-2002 7.8 0.0 5.0
Jun-2002 7.6 0.0 5.0
Jul-2002 7.6 0.0 5.0
Aug-2002 7.4 0.0 5.0
Sep-2002 7.6 0.0 5.0
Oct-2002 7.6 0.0 5.0
Nov-2002 7.5 0.0 5.0
Dec-2002 7.6 0.0 5.0
Jan-2003 7.5 0.0 5.0
Feb-2003 7.5 0.0 5.0
Mar-2003 7.4 0.0 5.0
Apr-2003 7.6 0.0 5.0
May-2003 7.8 0.0 5.0
Jun-2003 7.6 0.0 5.0
Jul-2003 7.7 0.0 5.0
Aug-2003 7.8 0.0 5.0
Sep-2003 7.9 0.0 5.0
Oct-2003 7.6 0.0 5.0
Nov-2003 7.4 0.0 5.0
Dec-2003 7.3 0.0 5.0
Jan-2004 7.3 0.0 5.0
Feb-2004 7.3 0.0 5.0
Mar-2004 7.3 0.0 5.0
Apr-2004 7.2 0.0 5.0
May-2004 7.1 0.0 5.0
Jun-2004 7.2 0.0 5.0
Jul-2004 7.1 0.0 5.0
Aug-2004 7.0 0.0 5.0
Sep-2004 6.9 0.0 5.0
Oct-2004 7.1 0.0 5.0
Nov-2004 7.2 0.0 5.0
Dec-2004 7.1 0.0 5.0
Jan-2005 6.9 0.0 5.0
Feb-2005 7.0 0.0 5.0
Mar-2005 6.9 0.0 5.0
Apr-2005 6.7 0.0 5.0
May-2005 7.0 0.0 5.0
Jun-2005 6.8 0.0 5.0
Jul-2005 6.7 0.0 5.0
Aug-2005 6.7 0.0 5.0
Sep-2005 6.7 0.0 5.0
Oct-2005 6.7 0.0 5.0
Nov-2005 6.3 0.0 5.0
Dec-2005 6.6 0.0 5.0
Jan-2006 6.7 0.0 5.0
Feb-2006 6.6 0.0 5.0
Mar-2006 6.5 0.0 5.0
Apr-2006 6.5 0.0 5.0
May-2006 6.2 0.0 5.0
Jun-2006 6.3 0.0 5.0
Jul-2006 6.5 0.0 5.0
Aug-2006 6.5 0.0 5.0
Sep-2006 6.5 0.0 5.0
Oct-2006 6.3 0.0 5.0
Nov-2006 6.5 0.0 5.0
Dec-2006 6.3 0.0 5.0
Jan-2007 6.4 0.0 5.0
Feb-2007 6.3 0.0 5.0
Mar-2007 6.3 0.0 5.0
Apr-2007 6.3 0.0 5.0
May-2007 6.2 0.0 5.0
Jun-2007 6.1 0.0 5.0
Jul-2007 6.0 0.0 5.0
Aug-2007 6.0 0.0 5.0
Sep-2007 6.0 0.0 5.0
Oct-2007 6.0 0.0 5.0
Nov-2007 6.1 0.0 5.0
Dec-2007 6.2 0.0 5.0
Jan-2008 6.1 0.0 5.0
Feb-2008 6.1 0.0 5.0
Mar-2008 6.2 0.0 5.0
Apr-2008 6.2 0.0 5.0
May-2008 6.2 0.0 5.0
Jun-2008 6.1 0.0 5.0
Jul-2008 6.2 0.0 5.0
Aug-2008 6.2 0.0 5.0
Sep-2008 6.3 0.0 5.0
Oct-2008 6.4 0.0 5.0
Nov-2008 6.7 15.0 5.0
Dec-2008 7.0 15.0 5.0
Jan-2009 7.5 15.0 5.0
Feb-2009 8.1 15.0 5.0
Mar-2009 8.3 15.0 5.0
Apr-2009 8.4 15.0 5.0
May-2009 8.6 15.0 5.0
Jun-2009 8.8 0.0 5.0
Jul-2009 8.8 0.0 5.0
Aug-2009 8.8 0.0 5.0
Sep-2009 8.5 0.0 5.0
Oct-2009 8.5 0.0 5.0
Nov-2009 8.6 0.0 5.0
Dec-2009 8.6 0.0 5.0
Jan-2010 8.4 0.0 5.0
Feb-2010 8.4 0.0 5.0
Mar-2010 8.3 0.0 5.0
Apr-2010 8.2 0.0 5.0
May-2010 8.1 0.0 5.0
Jun-2010 8.0 0.0 5.0
Jul-2010 8.2 0.0 5.0
Aug-2010 8.2 0.0 5.0
Sep-2010 8.2 0.0 5.0
Oct-2010 8.1 0.0 5.0
Nov-2010 7.8 0.0 5.0
Dec-2010 7.8 0.0 5.0
Jan-2011 7.8 0.0 5.0
Feb-2011 7.8 0.0 5.0
Mar-2011 7.8 0.0 5.0
Apr-2011 7.8 0.0 5.0
May-2011 7.7 0.0 5.0
Jun-2011 7.7 0.0 5.0
Jul-2011 7.4 0.0 5.0
Aug-2011 7.4 0.0 5.0
Sep-2011 7.4 0.0 5.0
Oct-2011 7.5 0.0 5.0
Nov-2011 7.6 0.0 5.0
Dec-2011 7.5 0.0 5.0
Jan-2012 7.7 0.0 5.0
Feb-2012 7.6 0.0 5.0
Mar-2012 7.3 0.0 5.0
Apr-2012 7.4 0.0 5.0
May-2012 7.5 0.0 5.0
Jun-2012 7.4 0.0 5.0
Jul-2012 7.3 0.0 5.0
Aug-2012 7.4 0.0 5.0
Sep-2012 7.4 0.0 5.0
Oct-2012 7.4 0.0 5.0
Nov-2012 7.3 0.0 5.0
Dec-2012 7.2 0.0 5.0
Jan-2013 7.1 0.0 5.0
Feb-2013 7.0 0.0 5.0
Mar-2013 7.3 0.0 5.0
Apr-2013 7.2 0.0 5.0
May-2013 7.0 0.0 5.0
Jun-2013 7.2 0.0 5.0
Jul-2013 7.3 0.0 5.0
Aug-2013 7.2 0.0 5.0
Sep-2013 7.1 0.0 5.0
Oct-2013 7.2 0.0 5.0
Nov-2013 7.1 0.0 5.0
Dec-2013 7.4 0.0 5.0
Jan-2014 7.2 0.0 5.0
Feb-2014 7.2 0.0 5.0
Mar-2014 7.1 0.0 5.0
Apr-2014 7.1 0.0 5.0
May-2014 7.3 0.0 5.0
Jun-2014 7.1 0.0 5.0
Jul-2014 7.1 0.0 5.0
Aug-2014 7.0 0.0 5.0
Sep-2014 7.0 0.0 5.0
Oct-2014 6.8 0.0 5.0
Nov-2014 6.8 0.0 5.0
Dec-2014 6.7 0.0 5.0
Jan-2015 6.8 0.0 5.0
Feb-2015 6.9 0.0 5.0
Mar-2015 6.8 0.0 5.0
Apr-2015 6.9 0.0 5.0
May-2015 6.8 0.0 5.0
Jun-2015 6.9 0.0 5.0
Jul-2015 6.9 0.0 5.0
Aug-2015 7.0 0.0 5.0
Sep-2015 7.1 0.0 5.0
Oct-2015 7.0 0.0 5.0
Nov-2015 7.1 0.0 5.0
Dec-2015 7.2 0.0 5.0
Jan-2016 7.3 0.0 5.0
Feb-2016 7.3 0.0 5.0
Mar-2016 7.2 0.0 5.0
Apr-2016 7.3 0.0 5.0
May-2016 7.0 0.0 5.0
Jun-2016 6.9 0.0 5.0
Jul-2016 6.9 0.0 5.0
Aug-2016 6.9 0.0 5.0
Sep-2016 7.0 0.0 5.0
Oct-2016 6.9 0.0 5.0
Nov-2016 6.8 0.0 5.0
Dec-2016 6.9 0.0 5.0
Jan-2017 6.8 0.0 5.0
Feb-2017 6.6 0.0 5.0
Mar-2017 6.7 0.0 5.0
Apr-2017 6.5 0.0 5.0
May-2017 6.6 0.0 5.0
Jun-2017 6.5 0.0 5.0
Jul-2017 6.3 0.0 5.0
Aug-2017 6.2 0.0 5.0
Sep-2017 6.2 0.0 5.0
Oct-2017 6.4 0.0 5.0
Nov-2017 6.1 0.0 5.0
Dec-2017 6.0 0.0 5.0
Jan-2018 5.9 0.0 5.0
Feb-2018 6.0 0.0 5.0
Mar-2018 5.8 0.0 5.0
Apr-2018 5.8 0.0 5.0
May-2018 5.9 0.0 5.0
Jun-2018 6.0 0.0 5.0
Jul-2018 5.9 0.0 5.0
Aug-2018 6.0 0.0 5.0
Sep-2018 5.8 0.0 5.0
Oct-2018 5.7 0.0 5.0
Nov-2018 5.7 0.0 5.0
Dec-2018 5.7 0.0 5.0
Jan-2019 5.7 0.0 5.0
Feb-2019 5.8 0.0 5.0
Mar-2019 5.9 0.0 5.0
Apr-2019 5.7 0.0 5.0
May-2019 5.4 0.0 5.0
Jun-2019 5.6 0.0 5.0
Jul-2019 5.8 0.0 5.0
Aug-2019 5.8 0.0 5.0
Sep-2019 5.6 0.0 5.0
Oct-2019 5.6 0.0 5.0
Nov-2019 5.9 0.0 5.0
Dec-2019 5.6 0.0 5.0
Jan-2020 5.5 0.0 5.0
Feb-2020 5.7 0.0 5.0
Mar-2020 8.4 15.0 5.0
Apr-2020 13.6 15.0 5.0
May-2020 14.1 0.0 5.0
Jun-2020 12.4 0.0 5.0
Jul-2020 11.0 0.0 5.0
Aug-2020 10.2 0.0 5.0
Sep-2020 9.2 0.0 5.0
Oct-2020 9.0 0.0 5.0
Nov-2020 8.7 0.0 5.0
Dec-2020 8.9 0.0 5.0
Jan-2021 9.2 0.0 5.0
Feb-2021 8.5 0.0 5.0
Mar-2021 7.6 0.0 5.0
Apr-2021 8.2 0.0 5.0
May-2021 8.2 0.0 5.0
Jun-2021 7.8 0.0 5.0
Jul-2021 7.5 0.0 5.0
Aug-2021 7.2 0.0 5.0
Sep-2021 7.1 0.0 5.0
Oct-2021 6.6 0.0 5.0
Nov-2021 6.2 0.0 5.0
Dec-2021 6.0 0.0 5.0
Jan-2022 6.5 0.0 5.0
Feb-2022 5.4 0.0 5.0
Mar-2022 5.3 0.0 5.0
Apr-2022 5.3 0.0 5.0
May-2022 5.2 0.0 5.0
Jun-2022 4.9 0.0 5.0
Jul-2022 4.9 0.0 5.0
Aug-2022 5.3 0.0 5.0
Sep-2022 5.2 0.0 5.0
Oct-2022 5.2 0.0 5.0
Nov-2022 5.1 0.0 5.0
Dec-2022 5.0 0.0 5.0
Jan-2023 5.0 0.0 5.0
Feb-2023 5.0 0.0 5.0

The benefits of this strong labour market are being widely shared among Canadians. More people aged 15 to 64 years are engaged in the labour market than ever before, with meaningful increases for historically under-represented groups, including women, newcomers, and young Canadians. Today, more Canadians have good middle class jobs than before the pandemic, with many also benefitting from stronger wage growth, particularly among lower-wage workers.

A Growing Workforce Benefits All Canadians

A strong and inclusive labour market has been a key driver of Canada's economic resilience over the past year.

Canada's job gains compared to when COVID-19 first hit have outperformed almost all of our G7 peers, supported by a rapidly expanding workforce (Chart 4). Notably, the government's historic investment in early learning and child care is helping more women fully participate in the workforce. The labour force participation rate for women aged 25 to 54 years has reached a record high of nearly 86 per cent, compared to just 77 per cent in the U.S. At the same time, a record high of 80 per cent of Canadians aged 15 to 64 years are now participating in the workforce, reflecting broad-based gains in employment opportunities across demographic groups (Chart 5). Making full use of the skills and talents of Canadians is a key driver of a stronger economy, helps to address labour market shortages, and increases the rate at which the economy can grow without generating inflationary pressures.

Immigration is a significant driver of economic growth and helps to build a stronger economy for everyone. Canada continues to post the fastest population growth in the G7, with strong immigration levels pushing population growth to its fastest pace since the 1950s (Chart 6).

Together, higher immigration and higher labour force participation are expanding the pool of available workers, and offsetting population aging more than in other G7 economies. The resulting boost to employment has helped maintain real household disposable income per capita, even as it declined in peer economies (Chart 7). This is expected to continue to support the Canadian economy throughout 2023.

Chart 4
Employment Recovery From the Pandemic in G7 Economies
Chart 4: Employment Recovery From the Pandemic in G7 Economies

Note: Last data points: February 2023 (Canada, U.S.), January 2023 (Germany, Italy, Japan), December 2022 (U.K.), and 2022Q4 (France).

Source: Haver Analytics.

Text Version
  Change in Employment from Pre-Pandemic Peak
U.K. -0.7
Japan -0.3
Italy 1.1
U.S. 2.0
Germany 2.6
Canada 4.3
France 4.5
Chart 5
Change in Employment Rates From the Pre-Pandemic Period
Chart 5: Change in Employment Rates From the Pre-Pandemic Period

Note: The age of each group is 25 to 54 years, except youth which is 15 to 24 years.

Source: Statistics Canada.

Text Version
  Change in employment rate (2019 to 2022)
Youth 0.2
All Canadians 1.4
Women 1.4
Women, youngest
child under 6
3.2
Off-reserve Indigenous 4.6
Recent Immigrants 7.0
Chart 6
Population Growth in Selected Economies
Chart 6: Population Growth in Selected Economies

Note: Last data point is 2022.

Sources: Statistics Canada, Haver Analytics.

Text Version
  Canada United States European Union
2000 0.94 1.12 0.11
2001 1.09 0.99 0.18
2002 1.09 0.93 0.11
2003 0.91 0.86 0.34
2004 0.94 0.93 0.36
2005 0.95 0.93 0.38
2006 1.02 0.97 0.32
2007 0.98 0.96 0.32
2008 1.09 0.95 0.34
2009 1.15 0.88 0.30
2010 1.12 0.83 0.14
2011 0.98 0.73 -0.16
2012 1.09 0.74 0.14
2013 1.06 0.70 0.16
2014 1.01 0.74 0.37
2015 0.75 0.74 0.18
2016 1.14 0.73 0.26
2017 1.21 0.63 0.16
2018 1.42 0.53 0.15
2019 1.45 0.46 0.08
2020 1.08 0.97 0.21
2021 0.58 0.16 -0.11
2022 1.84 0.38 -0.04
Chart 7
Real Household Disposable Income Per Capita in G7 Economies
Chart 7: Real Household Disposable Income Per Capita in G7 Economies

Note: Japan is not included. Last data point is 2022Q3.

Source: Organisation for Economic Co-operation and Development (OECD).

Text Version
  Canada Minimum of Other G7 Range of Other G7 Maximum of Other G7
2019
Q4
100.0 100.0 0.0 100.0
2020
Q1
100.7 98.3 3.8 102.0
2020
Q2
111.2 94.5 16.3 110.8
2020
Q3
105.8 98.7 7.8 106.5
2020
Q4
104.5 98.6 5.6 104.2
2021
Q1
107.7 98.7 16.8 115.5
2021
Q2
107.2 99.0 7.3 106.4
2021
Q3
106.6 99.0 6.1 105.2
2021
Q4
103.7 98.5 5.4 103.9
2022
Q1
105.9 97.3 3.9 101.2
2022
Q2
104.6 96.6 3.9 100.5
2022
Q3
104.1 96.1 4.8 100.8

With strong labour markets supporting household income, Canadians have also built up significant savings since the beginning of the pandemic (Chart 8). Notably, many people have continued to add to their pool of savings despite the elevated cost of living (Chart 9).

Chart 8
Change in Household Gross Savings Rates in G7 Economies
Chart 8: Change in Household Gross Savings Rates in G7 Economies

Note: Japan is not included. Last data point is 2022Q3.

Source: Organisation for Economic Co-operation and Development (OECD).

Text version
  Canada Minimum of Other G7 Range of Other G7 Maximum of Other G7
2019
Q4
0.0 0.0 0.0 0.0
2020
Q1
2.5 0.8 5.6 6.4
2020
Q2
21.7 9.6 11.4 20.9
2020
Q3
9.5 0.9 8.2 9.1
2020
Q4
7.8 4.8 5.4 10.2
2021
Q1
10.4 5.4 9.3 14.7
2021
Q2
10.3 2.0 4.4 6.4
2021
Q3
6.2 0.5 3.5 4.1
2021
Q4
3.8 -1.1 4.4 3.3
2022
Q1
5.7 -3.7 7.1 3.4
2022
Q2
2.6 -4.6 6.2 1.6
2022
Q3
3.2 -5.0 8.5 3.5
Chart 9
Household Savings Rate and Build-Up in Deposits
Chart 9: Household Savings Rate and Build-Up in Deposits

Note: Built-up deposits are calculated as actual relative to pre-pandemic trend.

Sources: Statistics Canada; Department of Finance Canada calculations.

Text version
  Built-Up Deposits (right axis) Savings Rate (left axis)
2019
Q4
0.0 2.8
2020
Q1
4.4 5.6
2020
Q2
73.8 26.5
2020
Q3
79.9 13.0
2020
Q4
96.4 11.0
2021
Q1
85.7 14.0
2021
Q2
89.3 14.1
2021
Q3
89.0 9.3
2021
Q4
90.9 6.5
2022
Q1
104.4 8.1
2022
Q2
124.7 5.0
2022
Q3
141.7 5.0
2022
Q4
158.8 6.0

A strong economic recovery has also resulted in labour shortages, as evidenced by Canada's near record-low unemployment rate combined with many unfilled job openings. These ongoing labour shortages are a challenge for many employers. Many businesses continue to face difficulties hiring workers, with the number of vacant job positions for every unemployed person currently about 75 per cent above the pre-pandemic norm. Canada's immigration system will continue to play an important role in helping our businesses grow.

Inflation Is Coming Down but Remains a Challenge for Canadians

As the global economy recovered from the pandemic, inflation emerged as a major global economic challenge. Inflation was already rising when Russia's full-scale illegal invasion of Ukraine drove up commodity prices, pushing consumer price inflation globally to multi-decade highs (Chart 10). In Canada, consumer price inflation reached a peak of 8.1 per cent in June 2022, putting pressure on many household budgets.

In addition to the effect on commodity prices of Russia's full-scale invasion, rising global inflation was driven by supply-chain disruptions, strong consumption of goods, and rebounding global demand. A shortage of workers combined with higher demand for services have also contributed to upward pressure on services prices in many countries.

Chart 10
Consumer Price Inflation in G7 Economies
Chart 10: Consumer Price Inflation in G7 Economies

Note: Last data point is February 2023, except for Japan which is January 2023. Canadian CPI inflation peaked at 8.1 per cent in June 2022.

Sources: Statistics Canada; Haver Analytics.

Text version
  Latest Most recent peak
Italy 9.97 11.84
U.K. 10.42 11.05
U.S. 6.04 9.06
Germany 8.68 8.82
Canada 5.25 8.13
France 6.28 6.20
Japan 4.39 4.39
Chart 11
Change in Consumer Price Inflation Since the Peak of June 2022 for Selected Items in Canada
Chart 11: Change in Consumer Price Inflation Since the Peak of June 2022 for Selected Items in Canada

Note: Last data point is February 2023.

Sources: Statistics Canada; Department of Finance Canada calculations.

Text version
  Change (actual data)
Energy -39.4
Child care services -19.9
All-items -2.9
Goods, excluding groceries and energy -1.2
Services, excluding shelter services 0.1
Shelter services 0.1
Groceries 1.1

In recent months, some of these pressures have started to ease, with commodity prices falling, supply-chain bottlenecks easing, and the demand for goods normalizing (Chart 11). At 5.2 per cent in February, Canadian consumer price inflation has fallen meaningfully since its June 2022 peak and is below the rates seen in many peer economies. Services price inflation in Canada—a gauge of underlying inflationary pressures—has also plateaued in recent months, while it has continued to rise in some other countries.

Inflation is still too high. To bring inflation down, central banks around the world have sharply raised interest rates in what has been one of the fastest and most synchronised monetary policy tightening cycles since the 1980s. As the government continues to make targeted investments to support Canadians and grow the Canadian economy, it is important that governments remain mindful of not fuelling inflation. Measures in Budget 2023 to provide inflation relief to the most vulnerable are thus carefully targeted, while investments in jobs and economic growth will play a meaningful role in Canada's continued prosperity.

Continued progress on reducing inflation will be needed over the coming year to ensure that this period of elevated inflation is only temporary. As a result, there remains uncertainty about how long interest rates around the world will need to remain elevated.

The Canadian Economy Has Been Resilient, but Canadian and Global Growth Is Slowing

While the Canadian economy has remained solid, higher interest rates are beginning to work their way through both the global and Canadian economies. This is resulting in weaker economic activity.

After growth of around 3 per cent annualized over the first three quarters of 2022, economic activity in Canada was unchanged in the final quarter. Despite slowing economic growth, final domestic demand—a measure of underlying economic strength—has shown resilience, and data so far suggest modest growth in the first quarter of 2023. So far, the consequences of moderating growth have been concentrated in housing markets, with higher mortgage rates pushing resales down 40 per cent, and prices down 16 per cent from their peaks in February 2022 (Chart 12). New construction is also slowing.

Inflation, elevated interest rates, and the higher costs, driven by global factors such as Russia's illegal invasion of Ukraine, are also creating affordability pressures for many Canadians. This is reflected in lower consumer confidence (Chart 13).

While business activity is at a healthy level and most businesses continue to report strong sales, many are also under financial pressure as the significant rise in interest rates boosts borrowing costs. A growing proportion of businesses expect activity to weaken in the coming year as the lagged impact of higher interest rates continues to feed into weaker consumer spending. As a result, many businesses have started to dial back their investment plans in recent months.

Chart 12
Home Sales, House Prices and Housing Starts, Canada
Chart 12: Home Sales, House Prices and Housing Starts, Canada

Note: Last data point is February 2023.

Sources: Canadian Real Estate Association; Canada Mortgage and Housing Corporation; Haver Analytics.

Text version

The chart shows the evolution of (a) house prices (as measured by the MLS Home Price Index), (b) residential resales, and (c) housing starts (6-month moving average). After declining early in the pandemic, each indicator increased considerably by early 2021 - reaching well above pre-pandemic levels - and remained elevated until early 2022. Since February 2022, house prices have declined 16% but remain 29% above January 2019 levels. Resales have fallen 40% from February 2022 and are now 18% below January 2019 levels. Housing starts, which were more resilient than house prices and resales for most of 2022, have declined 8% since October 2022 but remain 22% above January 2019 levels.

Chart 13
Measures of Consumer and Business Confidence, Canada
Chart 13: Measures of Consumer and Business Confidence, Canada

Note: Last data point is February 2023.

Sources: Conference Board of Canada; Canadian Federation of Independent Business.

Text version

The chart shows the evolution of business sentiment, as measured by the Canadian Federation of Independent Business' (CFIB) 12-month Business Barometer Index, and of consumer confidence, as measured by the Conference Board of Canada's Index of Consumer Confidence. Both indexes have seen a notable decline since mid-2022 but remain above their recessionary lows of 2009 and 2020.

Outside of Canada, the rapid tightening in monetary policy has revealed pockets of vulnerabilities in the global banking system. Since March 8, three medium-sized regional U.S. banks—Silicon Valley Bank, Signature Bank, and Silvergate Bank—have failed. In Europe, one large and systemically important bank, Credit Suisse, was also nearing failure before UBS agreed to acquire it. While the global banking system remains well capitalized, uncertainty over the extent and magnitude of additional credit-related losses that could accrue as economies slow remains elevated. In response, financial authorities have taken a series of steps to stabilize the financial system, maintain confidence in the banking system, and limit further negative feedback into the global economy.

These events sent tremors across global markets, which saw an abrupt rise in risk aversion, a sudden tightening in global financial conditions, and a sharp decline in global crude oil prices (Chart 14). While the responses by U.S. and Swiss authorities have calmed markets, uncertainty remains, and a handful of smaller U.S. banks are under review for potential downgrades. On March 19, five central banks, including the Federal Reserve and the Bank of Canada, announced coordinated action to enhance the provision of liquidity in the financial system to ease strains in global funding markets.

Globally, most central banks are set to maintain their policy rates at elevated levels or raise them further, with some continuing to shrink their balance sheets. This could keep broad liquidity conditions tighter than they have been in recent years. While the ramifications of banking sector stresses for the global economy are not yet clear, were the crisis to broaden, it could result in higher funding costs, restricted credit, and the amplification of the global economic slowdown. These developments also complicate the fight against global inflation, and markets now expect some pullback in policy rates as early as the second half of the year (Chart 15), suggesting the perceived likelihood of a soft landing has decreased.

The Canadian financial system is well-equipped to cope with the challenging global financial situation, and the Canadian banking sector is well-known for its stability and resilience, having fared better than many peers through the global financial crisis in 2008. Despite the healthy position of Canadian financial institutions, intensification of global financial stresses could have negative effects on the Canadian economy through tighter financial conditions and lower global economic activity.

Chart 14
Expected Future WTI Crude Oil Prices
Chart 14: Expected Future WTI Crude Oil Prices

Note: Last data point is March 2025.

Sources: Bloomberg; Haver Analytics.

Text version

The chart shows West Texas Intermediate (WTI) crude oil prices. Spot prices (as of the end of the month) are provided for January 2019 to March 2023. Spot prices fell from about US$60 per barrel prior to the pandemic to about US$20 per barrel in the spring of 2020, before rebounding to about US$90 per barrel in early 2022 and surging to about US115 per barrel in the months following Russia's invasion of Ukraine. Spot prices have since fallen to about US$75 per barrel by February 2023 and then below US$70 per barrel by late March 2023. Two sets of futures prices are provided for March 2023 to March 2025, which illustrate the downard shift in the futures prices from about US$70 per barrel by March 2025 (as of February 15, 2023) to about US$65 per barrel by February 2023 (futures curve as of March 20, 2023).

Chart 15
Canada and United States Policy Rate Expectations
Chart 15: Canada and United States Policy Rate Expectations

Note: Last data point is December 2024. Futures pricing converted into market-based odds of future announcements of the target interest rate.

Sources: Bloomberg; Haver Analytics.

Text version

The chart shows the Fed funds futures pricing converted into market-based odds of future United States Federal Reserve announcements of the target interest rate, and the overnight indexed swap (OIS) rates for Canada. It shows that as of March 22 2023, U.S. policy rate rates are expected to peak around 4.9 per cent in April 2023, while Canadian policy rates are expected to have already reached their peak of aroud 4.5 per cent.

2. Canadian Economic Outlook

Private Sector Economists Expect a Shallow Recession

The Department of Finance surveyed a group of private sector economists in February 2023. The average of private sector forecasts has been used as the basis for economic and fiscal planning since 1994, helping to ensure objectivity and transparency, and introducing an element of independence into the government's economic and fiscal forecast.

With higher interest rates, as well as slower economic growth in the U.S. and around the world, private sector economists expect Canada's economy to slow more than was projected in the 2022 Fall Economic Statement (Chart 16). Private sector economists expect the Canadian economy to enter a shallow recession in 2023. With a peak-to-trough decline of just 0.4 per cent, the contraction in real GDP is significantly smaller than during the 2008-09 recession (-4.4 per cent) and is less severe than the 1.6 per cent decline considered in the 2022 Fall Economic Statement downside scenario.

On an annual basis, real GDP growth is projected to decelerate from a strong 3.4 per cent in 2022 (slightly better than the 3.2 per cent projected in the 2022 Fall Economic Statement) to 0.3 per cent in 2023, before rebounding to 1.5 per cent in 2024 (previously 0.7 per cent and 1.9 per cent, respectively).

As the economy slows, Canada's near record-low unemployment rate is expected to rise to a peak of 6.3 per cent by the end of 2023. However, driven by Canada's strong labour market, unemployment is expected to remain low by historical standards, and far below the peaks of past recessions (Chart 17).

Chart 16
Real GDP Growth Projections
Chart 16: Real GDP Growth Projections

Sources: Statistics Canada; Department of Finance Canada September 2022 and February 2023 surveys of private sector economists.

Text version
FES 2022 (September 2022 Survey) February 2023 Survey
2022
Q4
0.2 0.0
2023
Q1
0.0 -0.3
2023
Q2
0.5 -0.8
2023
Q3
1.3 -0.3
2023
Q4
1.7 1.1
2022 3.2 3.4
2023 0.7 0.3
2024 1.9 1.5
Chart 17
Peak Unemployment Rates in Past Recessions
Chart 17: Peak Unemployment Rates in Past Recessions

Sources: Statistics Canada; Department of Finance Canada February 2023 survey of private sector economists.

Text version
Peak Unemployment Rates
1982
Q4
13.0
1992
Q4
11.7
2009
Q3
8.7
2020
Q2
13.4
2023
Q4
6.3

Private sector economists expect Consumer Price Index (CPI) inflation to continue to ease. Inflation is expected to fall below 3 per cent in the third quarter of 2023 and to reach about 2 per cent, the Bank of Canada's target, in the second quarter of 2024, little changed from 2022 Fall Economic Statement projections.

After surging following Russia's full-scale invasion of Ukraine, commodity prices fell sharply in the second half of 2022, helping to reduce CPI inflation—largely through lower energy prices. This had a negative impact on GDP inflation (a measure of the selling price of goods and services that are produced in Canada, including our exports), which in the last two quarters of 2022 was much lower than expected by private sector economists in the 2022 Fall Economic Statement. As a result, GDP inflation in 2022 was lower than projected and is revised down significantly in 2023.

Together, the downward revisions to GDP inflation and, to a lesser extent, real GDP have weighed considerably on nominal GDP projections. On an annual basis, nominal GDP increased by 11.0 per cent in 2022 (below the 11.6 per cent projected in the 2022 Fall Economic Statement) and is projected to slow to 0.9 per cent in 2023 (previously 2.6 per cent). As a result, nominal GDP is now expected to be $60 billion lower, on average per year, compared to the private sector economists' projections in the 2022 Fall Economic Statement. It is also $16 billion lower, on average per year, compared to the downside scenario considered in the 2022 Fall Economic Statement. As the broadest measure of the tax base, the downward revision to nominal GDP is having an impact on tax receipts and the government revenue outlook. Slowing growth in nominal GDP in 2023 will push up the debt-to-GDP ratio in 2023-24 before it continues trending down (see Annex 1 for further details on the economic and fiscal outlook).

Budget 2023 Economic Scenario Analysis

Canada's near-term economic outlook remains uncertain. While the February 2023 survey suggests a shallow recession in 2023, the wide range of views among forecasters highlights many plausible outcomes, ranging from a soft landing to a more pronounced downturn.

In January 2023, the IMF upgraded its global growth forecast for 2023 to 2.9 per cent (previously 2.7 per cent in its October outlook). China's reopening is expected to provide a boost to global growth. In other major economies, including the U.S. and Europe, easing supply-chain bottlenecks and lower commodity prices have reduced inflationary pressures, while economic activity has been more resilient than expected. Likewise, Canada has continued to show progress on lowering inflation while the economy has remained solid, especially in the labour market.

The risks underpinning the downside scenario considered in the 2022 Fall Economic Statement remain areas of concern. Should elevated global inflation persist, central banks could take their policy rates higher or keep them elevated for longer. This could occur, for example, if labour markets remain constrained, or if there is a resurgence in global commodity prices related to a faster rebound in China's economy or further supply shocks related to Russia's illegal invasion of Ukraine.

In addition to the path of inflation, there is also uncertainty about the impact of higher interest rates on the global economy. With the rapid tightening in monetary policy across the world, further disruptions in the global financial system could emerge. Some funding markets have become more strained due to lower levels of liquidity, as has been seen recently with the failure of three medium-sized regional U.S. banks and challenges for Credit Suisse, and an abrupt repricing of risk could trigger a broader tightening of lending standards.

Overall, the economic outlook in the February 2023 survey continues to provide a reasonable basis for fiscal planning, and outcomes that are better or worse than the survey are both plausible. Still, the latest developments in financial markets have raised the odds of a more pronounced slowdown. To facilitate prudent economic and fiscal planning, and in light of elevated global uncertainty and recent developments in financial markets, the Department of Finance has developed two scenarios that consider faster or slower growth tracks relative to the February survey (see Annex 1 for further details on the scenarios).

The downside scenario considers a more pronounced recession in Canada amid persistent elevated inflation, stresses in the global financial system associated with the sharp rise in interest rates, and a steeper housing correction. Real GDP contracts by 1.9 per cent from peak to trough compared to only 0.4 per cent in the survey, leading to slower growth in 2023 and 2024 (Chart 18). At the same time, weaker global demand weighs on commodity prices, with crude oil prices US$13 per barrel below the survey in 2023 and remaining US$3 per barrel below the survey over the rest of the forecast horizon.

In contrast, the upside scenario sees the Canadian economy avoid a recession as easing of supply challenges, both in Canada and globally, helps to bring down inflation even as economies remain stronger than anticipated. In Canada, this improved global economic backdrop is also supported by a larger boost from our rapidly growing population, expanding Canada's growth potential. A faster rebound in China's economy provides a boost to global growth and commodity prices, with crude oil prices US$4 per barrel above the survey in 2023 and US$8 per barrel higher for the rest of the forecast horizon. At the same time, an accelerated easing of global supply chain frictions, supported by China's reopening, results in lower inflation and interest rates compared to the survey.

Overall, nominal GDP is $41 billion above the survey, on average per year, in the upside scenario, while it is $41 billion lower in the downside scenario (Chart 19)

Chart 18
Real GDP Growth
Chart 18: Real GDP Growth

Sources: Department of Finance Canada February 2023 survey of private sector economists; Department of Finance Canada calculations.

Text version
February 2023 Survey Downside Scenario Upside Scenario
2023 0.3 -0.2 1.6
2024 1.5 1.0 1.7
2025 2.3 2.7 1.9
2026 2.2 2.3 1.9
2027 1.9 2.0 1.8
Chart 19
Nominal GDP Level Difference With February 2023 Survey Outlook
Chart 19: Nominal GDP Level Difference With February 2023 Survey Outlook

Sources: Department of Finance Canada February 2023 survey of private sector economists; Department of Finance Canada calculations.

Text version
Upside Scenario Downside Scenario
2023 47 -35
2024 53 -53
2025 43 -41
2026 34 -39
2027 29 -39

3. Canada's Place in a Changing Global Economy

The government is navigating the near-term economic challenges of inflation, higher interest rates, and supporting vulnerable Canadians with the rising cost of living, while also ensuring that Canada is well-placed to thrive in a rapidly changing global economy.

The accelerating work to build a net-zero global economy has sparked a global race to attract investment in clean economies and the growing industries of tomorrow. In the aftermath of Russia's illegal invasion of Ukraine, which exposed strategic economic vulnerabilities among many of the world's democracies, Canada's allies are also moving at speed to limit their dependence on dictatorships, and to friendshore their economies by building their critical supply chains through democracies like our own. In Budget 2023, the government makes transformative investments to ensure Canada does not fall behind at a time of significant opportunity for Canadians and Canadian businesses.

Moving to Net-Zero

As a major energy producer, the global shift to net-zero presents both a challenge and a great opportunity for Canada (Chart 20). Analysis conducted by the Bank of Canada and the Office of the Superintendent of Financial Institutions suggests that decisive action is required to ensure Canada remains competitive during the global shift to net-zero. Inaction could, in some scenarios, leave Canada's GDP approximately 10 per cent lower than it otherwise would be by 2050. Canada's future economic prosperity depends on the speed and scale of our response.

Chart 20
Aggregate Historical and Future Trajectory of GHG Emissions, 2000-2030
Chart 20: Aggregate Historical and Future Trajectory of GHG Emissions, 2000-2030

Note: Historical data excludes effects from land use, land use change and forestry sector (LULUCF) while future emissions include these effects.

Source: Environment and Climate Change Canada (2022), National Inventory Report 1990-2020 and 2030 Emissions Reduction Plan.

Text version
  Total greenhouse gas emissions (megatonnes of carbon dioxide equivalent)
2000 727
2001 718
2002 724
2003 743
2004 745
2005 741
2006 735
2007 757
2008 739
2009 698
2010 710
2011 721
2012 726
2013 732
2014 730
2015 733
2016 715
2017 725
2018 740
2019 738
2020 672
2021 670
2022 670
2023 658
2024 640
2025 619
2026 601
2027 577
2028 549
2029 518
2030 472

Having invested heavily in our clean economy since 2015, along with our highly skilled workforce and abundance of natural resources, Canada is well-positioned to succeed in the growing global clean economy if we continue to make smart long-term investments today. The scale of investments that Canada requires to reach net-zero by 2050 is significant, with estimates ranging from $60 billion to $140 billion per year on average. It will be up to the private sector to make the majority of these investments, but to avoid the consequences of underinvestment, it is critical that governments invest in policy frameworks capable of mobilizing private capital. Supporting the private sector to make the investments needed to thrive and create good middle class jobs in the clean economy is a joint responsibility. The federal government cannot do this alone, and provinces and territories must similarly invest heavily if Canada is to avoid the consequences of being underprepared for the global shift to net-zero.

Reducing Supply Chain Vulnerabilities

Simultaneously, Canada must navigate a fundamental shift in the patterns of global trade. For much of the past three decades, the global economy has become increasingly interconnected. While economic integration lowered costs for many goods, it also built a system of global trade that was vulnerable to the disruption of critical supply chains.

For Canada and our democratic partners, the vulnerability created by dependence on authoritarian regimes for critical goods is no longer tenable. Russia's weaponization of energy exports has forced the world's democracies to fundamentally rethink their supply chain vulnerabilities. China currently dominates key portions of supply chains for clean technologies, including batteries (Chart 21).

The mitigating of these vulnerabilities by the world's democracies will require a realignment of global trade, and the shifting of critical supply chains away from dictatorships and towards democracies like our own.

This process, which has been referred to as "friendshoring," represents a significant economic opportunity for Canada and for Canadian workers. As a stable democracy with a skilled workforce and a rich endowment of natural resources, Canada has a strong foundation from which to become a supplier of critical goods for our allies. Building upon this foundation will require investments in Canada's economic capacity, both now and into the future.

Chart 21
China's Comparative Concentration in the Global Electric Vehicle (EV) Battery Supply Chain, 2022
Chart 21: China's Comparative Concentration in the Global Electric Vehicle (EV) Battery Supply Chain, 2022

Source: International Energy Agency.

Text version

The chart shows the geographical distribution of the global electric vehicle battery supply chain in 2022. China is the largest single player for materials processing, taking over 50 per cent of the market in lithium, cobalt and graphite processing and over a quarter of nickel processing. China accounts for between approximately 70 and 85 per cent of the market in cell components (i.e. cathodes and anodes). Within downstream markets, China makes up at least three quarters of the battery cell production market and half of EV assembly. Conversely, Europe is a small second player in the processing of cobalt and in the battery cell production and EV assembly downstream markets, and the United States a relatively small third player in these downstream markets.

Transforming Challenges into Opportunities

The need for investment to manage these structural challenges will not be limited to one sector or one aspect of the economy. Broad-based investment will be required to grow our economy and create good middle class jobs in the years to come. The scale of required investments is massive and the private sector alone is unlikely to mobilize the level of capital required in Canada at sufficient speed.

Many of the investments that need to be made will stretch over decades and involve high up-front costs. Moreover, key sectors and technologies will have significant spillover effects by driving development of related industries. For example, fundamental inputs to clean production and the production of clean technologies, such as electricity, critical minerals, and carbon capture, utilization and storage (CCUS), will provide foundations for an expanding clean economy. For related sectors, such as hydrogen and clean manufacturing, this will boost their productivity and support their resilience, and help to generate new middle class jobs. Private investment decisions may not take full account of these spillovers, which increases the risk of underinvestment.

Without the right policy framework, Canada could see underinvestment in critical areas and a slow pace of innovation in new clean technology. Together, these would result in Canada falling behind the United States and other countries that are moving forward aggressively to build their clean economies, create middle class jobs, and ensure more prosperous futures for their people. Canada must act decisively to ensure it remains the location of choice for new investment in these sectors, particularly in the face of recent passage of U.S. Inflation Reduction Act (IRA).

Budget 2023 proposes substantial measures as the next steps in the government's plan to "crowd-in" new private investment by leveraging public investment and government policy. The goal of this approach is not to substitute government for the private sector, nor supplant market-based decision making. It is to leverage the tools of government to mobilize the private sector.

This approach is not about the government picking individual corporate winners in an effort to engineer a preferred vision of the economy in 2050. That approach did not work in the past, and is even less likely to work in today's environment of rapid technological change. The tax incentives and investment supports proposed in Budget 2023 are designed to set a framework for boosting overall investment, while leaving the private sector to determine how to invest based on market signals.

At the same time, the government has an indispensable role in ensuring that investment happens where it will have the greatest long-term impact for Canadians' standard of living and the reduction of our emissions. This means focusing on areas where Canada has a comparative advantage, and making investments that will have the greatest impact on Canada's productive capacity and ability to create good middle class jobs. It will also mean looking to industries that will grow in a changing global economy, and seeking out areas where Canada can both benefit at home and contribute to the economic resilience of our friends and allies.

Budget 2023 takes a strategic approach to supporting Canada's long-term economic competitiveness and prosperity by investing in securing Canada's clean technology advantage, our future as a global leader in clean fuels, and our natural advantage as a producer of clean electricity. In doing so, we can help to usher in a new era of prosperity for Canadians.

4. Investing Responsibly in Canada's Future

Budget 2023 lays out a responsible plan to grow Canada's economy and create good middle class jobs for Canadians; to strengthen Canada's universal public health care system and provide dental care for Canadians; to protect our environment; and to support a range of other key priorities that matter to Canadians.

Years of responsible fiscal stewardship have left Canada in an enviable fiscal position relative to our global peers. This responsible stewardship also allows the government to act proactively, with support for those who need it most and critical investments in the long-term prosperity of Canadians. At the same time, the government recognizes there is an opportunity to refocus existing spending, following the pandemic, on priorities that matter most to Canadians.

Table 1
Economic and Fiscal Developments, Policy Actions and Measures
billions of dollars
Projection
2022–2023 2023–2024 2024–2025 2025–2026 2026–2027 2027–2028
Budgetary balance – 2022 Fall Economic Statement (FES 2022) -36.4 -30.6 -25.4 -14.5 -3.4 4.5
Economic and fiscal developments since FES 2022 6.4 -4.7 -4.9 -5.1 -7.5 -10.3
Budgetary balance before policy actions and measures -30.0 -35.3 -30.3 -19.5 -10.9 -5.8
Policy actions since FES 2022 -5.4 0.7 3.2 2.6 1.7 0.1
Budget 2023 measures (by chapter)
1. Making Life More Affordable and Supporting the Middle Class -2.5 -0.8 -0.3 -0.5 -0.5 -0.6
2. Investing in Public Health Care and Affordable Dental Care -2.0 -3.6 -4.6 -6.4 -6.8 -7.9
3. A Made in Canada Plan: Affordable Energy, Good Jobs, and a Growing Clean Economy 0.0 -1.2 -3.1 -4.4 -5.9 -6.3
4. Advancing Reconciliation and Building a Canada That Works for Everyone -3.1 -2.5 -1.3 -1.0 -0.6 -0.6
5. Canada's Leadership in the World -0.1 -0.2 -0.1 -0.1 -0.1 -0.1
6a. Effective Government and Improving Services to Canadians 0.1 2.8 0.1 0.8 2.9 3.2
6b. A Fair Tax System 0.0 0.2 1.5 1.6 4.4 4.0
Total – Actions Since FES 2022 and Budget 2023 Measures -13.0 -4.8 -4.7 -7.3 -4.9 -8.3
Budgetary Balance -43.0 -40.1 -35.0 -26.8 -15.8 -14.0
Budgetary Balance (per cent of GDP) -1.5 -1.4 -1.2 -0.9 -0.5 -0.4
Federal debt (per cent of GDP) 42.4 43.5 43.2 42.2 41.1 39.9

A negative number implies a deterioration in the budgetary balance (lower revenue or higher expenses). A positive number implies an improvement in the budgetary balance (higher revenue or lower expenses).

Investing in Canada's Future is a Joint Responsibility

Driven by the federal government providing eight out of every ten dollars in emergency pandemic spending, provincial and territorial governments continue to significantly outperform fiscal projections. Fiscal results to date show that the aggregate provincial-territorial budgetary balance moved into a surplus position in 2021-22, with an expectation that it will remain broadly balanced thereafter. This stands in contrast to the deficit of 1 per cent of GDP in 2021-22 that had been expected through provincial and territorial 2022 budgets (Chart 22).

The solid provincial-territorial fiscal position means that, together, provinces and territories have the ability to take proactive action to help build Canada's clean economy.

Chart 22
Federal and Provincial Budgetary Balances
Chart 22: Federal and Provincial Budgetary Balances

Note: Actual data up to 2021-22. The provincial-territorial aggregate for years 2022-23 reflect 2022 fall updates and 2023 budgets; for 2023-24 and 2024-25, the balance reflects 2022 budgets, 2022 fall updates, and 2023 budgets.

Text version
(% of GDP) 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25
Total Provincial-Territorial -0.6 -0.5 -0.5 -0.2 -0.8 -2.2 0.4 0.4 -0.2 -0.1
Federal Government -0.1 -0.9 -0.9 -0.6 -1.7 -7.9 -3.6 -1.5 -1.4 -1.2

A Responsible Fiscal Plan in Challenging Times

The fiscal outlook presented in Budget 2023 continues to place the government's fiscal stance well within key fiscal sustainability indicators, including:

These indicators underscore the government's continued commitment to its fiscal anchor of reducing federal debt as a share of the economy over the medium-term, even as the government invests in Canadians.

Chart 23
Federal Debt
Chart 23: Federal Debt

Source: Department of Finance Canada.

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Federal debt Historical Budget 2023
1981 29.2  
1982 35.2  
1983 37.3  
1984 42.1  
1985 45.6  
1986 48.9  
1987 49.9  
1988 50.2  
1989 51.2  
1990 54.3  
1991 58.4  
1992 62.5  
1993 65.3  
1994 66.2  
1995 66.6  
1996 65.5  
1997 61.7  
1998 58.9  
1999 53.6  
2000 47.0  
2001 44.7  
2002 42.3  
2003 39.5  
2004 37.0  
2005 33.9  
2006 31.2  
2007 29.0  
2008 28.2  
2009 33.4  
2010 33.4  
2011 33.4  
2012 34.0  
2013 32.9  
2014 31.5  
2015 31.9  
2016 32.2  
2017 31.4  
2018 30.7  
2019 31.2  
2020 47.5  
2021 45.2 45.2
2022   42.4
2023   43.5
2024   43.2
2025   42.2
2026   41.1
2027   39.9
Chart 24
Public Debt Charges
Chart 24: Public Debt Charges

Source: Department of Finance Canada.

Text version
  Historical Forecast Forecast with 100 basis-point increase in interest rates
1981 4.1    
1982 4.4    
1983 4.8    
1984 5.4    
1985 5.5    
1986 5.5    
1987 5.4    
1988 5.7    
1989 6.1    
1990 6.5    
1991 6.3    
1992 5.8    
1993 5.4    
1994 5.6    
1995 5.9    
1996 5.5    
1997 4.8    
1998 4.6    
1999 4.3    
2000 4.0    
2001 3.5    
2002 3.1    
2003 2.9    
2004 2.6    
2005 2.4    
2006 2.3    
2007 2.1    
2008 1.7    
2009 1.7    
2010 1.7    
2011 1.6    
2012 1.4    
2013 1.3    
2014 1.2    
2015 1.1    
2016 1.0    
2017 1.0    
2018 1.0    
2019 1.1    
2020 0.9    
2021 1.0    
2022   1.2  
2023   1.6 0.1
2024   1.6 0.2
2025   1.5 0.3
2026   1.5 0.3
2027   1.5 0.3
Scenario Analysis

As discussed in section 2, while the latest developments in financial markets have raised the odds of a more pronounced slowdown, outcomes that are better or worse than the February survey of private sector economists are both plausible. To facilitate prudent economic and fiscal planning, and in light of elevated global uncertainty and recent developments in financial markets, the Department of Finance has developed two scenarios that consider faster or slower growth tracks relative to the February survey.

In the upside scenario, the budgetary balance would improve by an average of approximately $6.5 billion per year (Chart 25) and remove 1.3 percentage points from the federal debt-to-GDP ratio by 2027-28 (Chart 26).

In the downside scenario, the budgetary balance would deteriorate by an average of approximately $7.2 billion per year and add 1.6 percentage points to the federal debt-to-GDP ratio by 2027-28. That said, even under the downside scenario, the deficit would remain below 1 per cent of GDP by the end of the forecast horizon, and the federal debt-to-GDP ratio would still be lower in 2027-28 than it is today.

Details of the government's fiscal outlook and the fiscal impact of the scenarios can be found in Annex 1.

Chart 25
Federal Budgetary Balance under Economic Scenarios
Chart 25: Federal Budgetary Balance under Economic Scenarios

Sources: Department of Finance Canada February 2023 survey of private sector economists; Department of Finance Canada calculations.

Text version
$ billions 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28
Budget 2023 -43.0 -40.1 -35.0 -26.8 -15.8 -14.0
Downside -43.0 -47.0 -42.1 -34.2 -23.3 -21.4
Upside -42.2 -32.3 -28.6 -20.2 -10.3 -7.8
Chart 26
Federal Debt-to-GDP under Economic Scenarios
Chart 26: Federal Debt-to-GDP under Economic Scenarios

Sources: Department of Finance Canada February 2023 survey of private sector economists; Department of Finance Canada calculations.

Text version
per cent 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28
Budget 2023 42.4 43.5 43.2 42.2 41.1 39.9
Upside 42.4 42.4 41.9 41.0 39.8 38.6
Downside 42.4 44.3 44.4 43.5 42.5 41.5

International Comparisons

Including new measures in Budget 2023, Canada's net debt as a share of the economy is still lower today than in any other G7 country prior to the pandemic—an advantage that Canada is forecasted to maintain (Chart 27). Canada is also forecasted to post one of the largest improvements in its fiscal balance among G7 countries since the beginning of the COVID-19 pandemic, resulting in Canada having the smallest deficit in the G7, both this year and next (Chart 28).

Canada maintains a long tradition of responsible fiscal management along with several other strengths, such as sound macroeconomic policy frameworks, a large and diverse economy, and strong governing institutions which continue to shape Canada's excellent credit ratings from Moody's (Aaa), S&P (AAA), and Fitch (AA+). Canada is the third-largest economy in the world to have a AAA rating from at least two of the three major global credit rating agencies, together with only the United States and Germany.

Combined with the significant investments made since 2015 in the long-term capacity and resiliency of the Canadian economy, the additional investments in health care and Canada's clean economy presented in Budget 2023 can be expected to generate social and economic returns for decades, helping to bolster Canada's international economic and fiscal strengths, and maintain our enviable credit ratings.

Chart 27
General Government Net Debt Forecasts, G7 Countries
Chart 27: General Government Net Debt Forecasts, G7 Countries

Notes: The internationally comparable definition of "general government" includes the central, state, and local levels of government, as well as social security funds. For Canada, this includes the federal, provincial/territorial, and local and Indigenous government sectors, as well as the Canada Pension Plan and the Quebec Pension Plan. The incremental impacts of Budget 2023 was added to the IMF's October 2022 forecasts.

Sources: International Monetary Fund, October 2022 Fiscal Monitor; Department of Finance Canada calculations.

Text version
  2019 2022 2024
Japan 151.5 172.6 172
Italy 121.7 135.4 135
France 88.9 100.3 102
United States 83 94.7 101.6
United Kingdom 74.1 75.3 65.1
Germany 40.4 47.7 47
Canada 23.1 30.5 31.725
Chart 28
General Government Balance Forecasts, G7 Countries
Chart 28: General Government Balance Forecasts, G7 Countries

Notes: The internationally comparable definition of "general government" includes the central, state, and local levels of government, as well as social security funds. For Canada, this includes the federal, provincial/territorial, and local and Indigenous government sectors, as well as the Canada Pension Plan and the Quebec Pension Plan. The incremental impacts of Budget 2023 was added to the IMF's October 2022 forecasts.

Sources: International Monetary Fund, October 2022 Fiscal Monitor; Department of Finance Canada calculations.

Text version
  2019 2020 2021 2022 2023 2024
IMF with Budget 2023 impact 0 -11.4 -5 -2.2 -1.5 -1.2
Canada (IMF October 2022) 0 -11.4 -5 -2.2 -1.2 -0.9
Minimum of other G7 country range -5.5 -14.5 -10.9 -7.9 -5.7 -6.6
Maximum of other G7 country range 1.5 -4.3 -3.7 -3.3 -2.3 -1.5
Other G7 country range 7 10.2 7.2 4.6 3.4 5.1

Preserving Canada's Fiscal Advantage: Maintaining our Fiscal Anchor

The federal government's fiscal anchor—reducing the federal debt-to-GDP ratio over the medium term—remains unchanged and is being met.

The Budget 2023 forecast shows the federal debt-to-GDP ratio declining in 2024-25 and throughout the remainder of the period. The government's spending plan is also projected to remain fiscally sustainable over the long term. Modelling scenarios based on a set of reasonable economic and demographic assumptions show the federal debt-to-GDP ratio continuing to decline over the entire long-term projection horizon ending in 2055-56 (Chart 29). This is despite adverse demographic trends, including an aging population, assumed modest future productivity growth rates and projected increases in borrowing costs.

While based on reasonable assumptions, these long-term projections should not be viewed as forecasts. Notably, these projections do not reflect all potential economic and fiscal impacts of the global economic evolutions that Canada will have to navigate over the coming decades, nor do they reflect positive impacts that can be expected to result from the foundational investments made by the government up to this budget. Details and sensitivity analysis around these long-term fiscal projections are presented in Annex 1.

Chart 29
Long-Term Projections of the Federal Debt
Chart 29: Long-Term Projections of the Federal Debt

Sources: Statistics Canada; Department of Finance Canada.

Text version
Year 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 2027-28 2028-29 2029-30 2030-31 2031-32 2032-33 2033-34 2034-35 2035-36 2036-37 2037-38 2038-39 2039-40 2040-41 2041-42 2042-43 2043-44 2044-45 2045-46 2046-47 2047-48 2048-49 2049-50 2050-51 2051-52 2052-53 2053-54 2054-55 2055-56
Upside 31.87 32.17 31.36 30.66 31.18 47.46 45.21 42.37 42.44 41.87 40.96 39.78 38.60 37.53 36.50 35.46 34.45 33.44 32.38 31.25 30.01 28.77 27.51 26.24 24.95 23.64 22.31 20.95 19.57 18.15 16.71 15.24 13.75 12.23 10.68 9.11 7.51 5.88 4.22 2.54 0.84
Downside 31.87 32.17 31.36 30.66 31.18 47.46 45.21 42.39 44.25 44.43 43.53 42.49 41.55 40.51 39.57 38.75 38.01 37.27 36.48 35.63 34.65 33.68 32.69 31.69 30.67 29.64 28.58 27.50 26.39 25.24 24.08 22.89 21.66 20.42 19.14 17.84 16.52 15.16 13.77 12.36 10.93
Budget 2023 31.87 32.17 31.36 30.66 31.18 47.46 45.21 42.39 43.45 43.15 42.24 41.06 39.95 38.90 37.89 36.96 36.06 35.16 34.22 33.20 32.07 30.94 29.80 28.64 27.47 26.28 25.06 23.82 22.54 21.24 19.92 18.57 17.19 15.78 14.36 12.92 11.45 9.96 8.43 6.88 5.30

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