Canada's economy uncertain, more rate cuts expected

Canada's Gross Domestic Product (GDP) growth rate in the third quarter of 2024 will be around 2.8%, the fastest growth rate in more than a year.

The Canadian economy is facing many internal problems, slowing growth. (Source: The Canadian Press)

In an article posted on thehub.ca, expert Theo Argitis commented that the Bank of Canada (BoC) has cut interest rates for the second time in a row amid a sense of urgency, as well as new warnings about the national economic situation in the near future.

BoC Governor Tiff Macklem said his focus will shift from inflation concerns to boosting growth, even though Canada's current inflation remains above the BoC's 2% target.

“Expectations for more rate cuts are reasonable. Downside risks are rising in the BoC’s monetary policy discussions and Canada needs growth,” said Macklem.

The BoC's goal at the moment is to ease the financial burden on indebted households and stimulate spending to address the growing economic slowdown.

Based on this target, along with economic growth in the second quarter of 2024, BoC forecasts that the growth rate of Gross Domestic Product (GDP) in the third quarter of 2024 will be around 2.8%, the fastest growth rate in more than a year.

This growth momentum is likely to extend into 2025, with forecasts of more than 2% before reaching 2.4% in 2026.

However, this growth forecast is based on a notable assumption: that new immigrants and temporary workers continue to choose to come to Canada to find work.

But this condition is not certain.

With the population increasing by 2.3 million people in the past two years, an annual population growth rate that exceeds the expected 3%, the Canadian labour market is facing enormous pressure to absorb these new workers.

The unemployment rate is now at 6.4%, up 1.4% from the end of 2022, and it reflects the escalating challenge.

Despite recent rate cuts, Canada’s interest rate remains higher than it was before the COVID-19 pandemic, at 4.5%. Persistent inflation continues to prevent the BoC from providing additional stimulus to the economy.

All this agency is doing seems to be following the natural course of the economy, without much in the way of major breakthroughs.

Still, Canada's economy is benefiting from a number of drivers, including strong global growth and the game-changing opening of the Trans Mountain gas pipeline, which will boost exports and investment.

In addition, there are natural rebound effects that often occur after a period of slow growth.

Source: https://baoquocte.vn/kinh-te-canada-khong-chac-chan-ky-vong-nhieu-dot-cat-giam-lai-suat-hon-nua-281046.html