Global GDP growth is expected to cool from 7.1% and 3.6% in 2021 and 2022, respectively, to just 1.9% in 2023 and 2.4% in 2024. Runaway inflation over the past 18 months across most advanced countries, including Canada, indicates significant excess demand for goods, services and labour. Central banks are belatedly trying to bring demand into balance with supply, with only partial support from fiscal policymakers.
Amid higher interest rates, Canada’s GDP growth is projected to slow to 1.0% in 2023 and 1.8% in 2024. Looking through the veneer of population growth, Canada is one of the few advanced countries not to have recovered its pre-pandemic level of GDP per capita, the primary measure of prosperity.
Whilst Canada may dodge a recession in GDP due to booming population growth, GDP per capita could fall by around 1-3% in 2023. In other words, the real per person incomes of households and businesses, which have declined since 2019, will likely fall further in 2023.
B.C. will also likely dodge an outright recession, but GDP growth will slow to just 0.9% in 2023 and 1.5% in 2024.
Hiring challenges will persist in some sectors, but labour demand overall will downshift as the economy slows.
Population growth underpins most of the province’s economic expansion as the global economic slowdown weighs on B.C. exports and domestic economic activity slows under the weight of higher interest rates. A notable exception is non-residential construction, boosted by record investment in non-residential buildings in the public sector and sustained by ongoing construction of large capital projects in B.C.’s energy sector.
Structural challenges, including chronically weak investment in machinery and equipment, mean B.C. is heading into the slowdown on a weak footing. Many of B.C.’s high-productivity, high-paying sectors have shed jobs over the past five years. The global slowdown will reinforce this trend. Job growth in the private sector has been weak for the past few years and is underpinned by a handful of industries, while public sector hiring has been exuberant.