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Economic and Financial Outlook

Signs of Fractures Are Beginning to Show

March 16, 2023

The global economy slowed in the second half of 2022, but not as severely as anticipated. There have even been signs of improvement since the start of the new year. In the United States, despite a positive start to the year on the employment and consumer spending fronts, things are set to cool for the first quarter of 2023, with annualized real GDP growth expected to clock in at just under 1.5%. Canadian economic growth surprised economists by stalling in Q4 2022. But despite this weakness, we’ve upgraded our forecast for real GDP growth in the first half of 2023 due to an improved outlook for domestic demand to start the year. That said, our baseline forecast continues to call for a short and shallow recession in 2023. In Quebec, although real GDP rose in October and November after several months of weakness, the recession scenario isn’t off the table just yet. As pressures on the financial system have begun to emerge, market participants have become less complacent regarding the fallout of the rapid and aggressive rate hiking cycle.