Canada not immune from faltering global growth, says IMF chief economist
Canadians facing high food prices, prospect of job losses
The chief economist of the International Monetary Fund says Canada is facing many of the same challenges — high inflation, lacklustre growth and anxious financial markets — that are dragging down the global economic outlook.
"The Canadian economy has been doing well in the rebound, but it's buffeted by the same winds that are affecting the global economy," said Pierre-Olivier Gourinchas in an interview on Rosemary Barton Live airing Sunday.
The IMF says the world is experiencing "a broad-based and sharper-than-expected slowdown" with growth expected to slow to 2.7 per cent next year, down from 3.2 per cent this year. The UN financial agency projects the Canadian economy will grow by just 1.5 per cent.
"There is a slowdown in the US that is coming. Commodity prices, energy prices are coming down. There are all the uncertainties, financial tightening and financial markets are very nervous. All of these factors are going to weigh down on on the Canadian economy next year," Gourinchas told CBC chief political correspondent Rosemary Barton.
The IMF's projections are just the latest in a series of gloomy assessments from economic experts recently. Former Bank of Canada governor Mark Carney told the Senate finance committee Thursday Canada would likely fall into a recession next year — though he noted this country should fare comparatively well.
Deputy prime minister and finance minister Chrystia Freeland has also warned of dark clouds on the horizon.
"There are still some difficult days ahead for Canada's economy. To say otherwise would be misleading," she said Wednesday.
And on Friday, Prime Minister Justin Trudeau also nodded to the prospect of an uncertain economic future. He emphasized the passage of several targeted measures — such as the GST tax credit boost passed Tuesday — to help blunt the effect of inflation on some Canadians. But he acknowledged many were facing a challenge.
"That's why remaining fiscally responsible and measured in our response is essential, because we have to prepare for whatever might come in the coming weeks and months," he said.
Food prices outpace headline inflation
Central banks around the world have responded to rising inflation by ratcheting up interest rates. That's part of the mission of keeping prices under control, Gourinchas said, but it would sting economies.
"In the context in which the economy is already slowing down because of the uncertainty and the shocks that are hitting the global economy, it is going to make it that much more painful," he said.
He warned that as the economy slows, unemployment will rise, though job losses would "hopefully remain fairly modest."
The cost of living has been a major focus for the government's political opposition, attacking what they describe as a slow and ineffective response to inflation.
"Unfortunately, the prime minister is proposing to do exactly nothing for the vast majority of struggling families, which will get nothing, and even the small minority that do get something will find it gobbled up by increased inflation," said Conservative Leader Pierre Poilievre earlier this week.
The NDP have blamed some inflation on corporate greed, and passed a motion — with unanimous all-party support — to look into rising food prices.
The cost of food has outpaced the official rate of inflation, rising more than 11 per cent since this time last year.
"We haven't seen this kind of increase year over year since 1981," said Anil Arora, chief statistician for Statistics Canada, in an interview on Rosemary Barton Live Sunday.
Arora said data shows inflation is having a significant effect on those with fixed incomes, such as seniors.
"It is worrisome. You can see it and the numbers do show it," he said.
Gina Kokoska, who lives in Nova Scotia, told Barton on Sunday that she had to cut her maternity leave short to return to work in order to keep up with rising costs, and were trying to cut expenses wherever they could
"We're coming into winter now and the cost of heating is exorbitant … we might be wearing a lot more sweaters this year."
With files from Rosemary Barton and Tyler Buist