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Economic Viewpoint

All Canada’s provinces to feel fight against inflation, some will go into recession

October 13, 2022
Hélène Bégin, Principal Economist • Marc Desormeaux, Principal Economist

In this first-ever Desjardins Economic Studies Provincial Outlook, we provide detailed analysis of the economies and finances in all of Canada’s provinces, as of our September 2022 Economic and Financial Outlook. Just as we recently projected at the national level, no province will be immune to the growth-sapping effects of sharply rising interest rates, elevated inflation, rapidly correcting housing markets and a deteriorating global expansion over the next two years. Ontario, British Columbia (BC) and the Maritimes appear most exposed to the housing downturn, and that is reflected in our forecasts. By contrast, commodity-producing regions with their more affordable housing should get a boost from higher incomes and nominal export values even as oil prices moderate approaching 2024. These regions will likely also top provincial growth rankings through 2023. Major project activity—particularly in BC and Saskatchewan—and rebounding oil and auto production will be bright spots against an otherwise downcast economic backdrop. Extremely tight labour markets will provide a measure of protection against deep, widespread job losses as the Canadian economy enters recession territory. After revenue windfalls in many provinces, fiscal policy will likely become more stimulative as mid-year budget updates are released this fall. However, this will probably hinder efforts to contain price pressures, and we have yet to see the full effects of inflation on public finances.