The outlook is a positive ‘soft landing’ for Canada’s economy in 2024, according to the vice-president, of research and development, for the Business Development Bank of Canada.
That was the unexpected message Pierre Cleroux delivered to a Kelowna Chamber of Commerce morning breakfast audience on Thursday at the Coast Capri Hotel.
While many entered the forum braced for talk of a recession, Cleroux offered a different message, saying he expects the economy to start growing out of its current malaise, driven by policies such as raising interest rates, as inflation becomes more definitively under control.
A leading indicator of that happening is a reduction in the inflation rate from a high of eight per cent down to less than three per cent, with the Bank of Canada rate target being two per cent.
He said while the interest rate hike has caused hardship on home mortgages along with retail spending, the over-arching purpose of instigating that hardship was to curtail inflation while not creating an economic recession.
Cleroux predicted interest rates are not likely to increase further, while a potential rate decline is being forecast beginning next summer.
He described Canada’s current economic fortunes as positive, saying talk of a recession requires a little deeper dive into the statistics than just a measure of economic growth, which has hovered in the negative just below zero level for the last two quarters.
“By definition, the media calls that a recession but it is important to understand our economy has remained relatively stable through this inflationary period, which is very positive,” he said.
“We had a slowdown of the economy in response to rising inflation. We are far from being in a recession.”
He said those economic indicators that have taken the brunt of the interest rate increase negative impact will see a positive resurgence in those areas of consumer spending, while the business sector has to take the opportunity to re-access how to respond to change.
He said unlike the recessions in 2020, caused by the COVID pandemic and supply chain issues, and 2009, caused by the U.S. economic downturn, Canada remains in control of its economic destiny.
“Our employment rate has remained low, our economic productivity is still healthy and the supply chain disruptions have been resolved, returning back to 2019 levels,” he said.
For B.C., Cleroux cited three factors - China group travel to B.C. being suspended, the housing market taking a hit and the impact of the wildfires last summer - as negatively impacting the provincial economy.
“The real estate market has an oversized impact on B.C.’s economy compared to other provinces,” he said.
Another issue facing B.C., he noted, was a labour shortage combined with people leaving the workforce.
“In B.C., 34,400 people left the workforce in October 2023, compared to 17,200 in January 2000,” he explained.
“That is a trend that is going to continue over the next five to seven years, as baby boomers continue to retire and not enough young people are entering the workforce to replace them.”
Cleroux said that places a renewed importance on immigration to fill those jobs, which in turn bodes well for the provincial economy because people moving here will become economic contributors, from needing a place to live to consumer spending.
“When it comes to the labour shortfall, all provinces face the same challenges,” he added.
He noted B.C.’s population demographics for residents over age 65 has shifted from 13 per cent in 2000 to 20 per cent this year.
He said an increase in immigration, stalled during the COVID pandemic, is only part of the labour shortfall solution.
He said employers have to take greater advantage of automation and technology, develop a people strategy that reflects creating a work culture people want to be a part of and expand the talent pool.
“Technology does not replace people but it can carry out tasks required in a business the labour shortfall can’t fill,” he said.
In thanking Cleroux for his presentation, Kelowna Chamber of Commerce past president Pamela Pearson said, “I think a lot of us heard a more positive message than we thought we would hear.”
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