Canada is not currently in a recession, nor is it heading for one, Finance Minister Bill Morneau said on Wednesday, quickly dispelling a notion that experts and economists alike have begun to contemplate.
“They would be incorrect,” Morneau said in his first remarks since releasing the 2019 federal budget on Tuesday. “That would be technically wrong and certainly not in line with our expectations.”
Economic growth in Canada was almost non-existent in the fourth quarter of 2019, due to a collapse of oil prices and a continued decline in housing and business investment.
Morneau said that the government had already projected two quarters of weak growth — the fourth quarter of 2018 and the first quarter of 2019 — before the economy once again picks up steam.
“We’re expecting…that we will have a return to growth at expected levels in the second quarter (of 2019) and our long-term forecasts are positive,” Morneau said in Toronto at a breakfast event for members of the Canadian Club Toronto, the Empire Club of Canada and the Toronto Region Board of Trade.
Earlier this week, Fidelity Investments portfolio manager David Wolf, a former adviser at the Bank of Canada, suggested Canada may already be in a recession, even if the economic numbers do not match the technical definition of two consecutive quarters of economic decline. GDP shrank by 0.1 per cent in November and December. Due to a stronger-than-expected October, Canada eked out 0.4 per cent growth in the fourth quarter.
Gluskin Sheff chief economist David Rosenberg has also said that recession is “unavoidable” this year and that if Canada isn’t already in one, it’s one rung away on the ladder.
One of the driving factors leading economists to begin to hypothesize about a recession is the sharp decline in Canada’s housing market and increasing household debt.
The Liberal government addressed concerns about housing affordability in this week’s Federal Budget by introducing a mortgage incentive for first-time home buyers earning under $120,000 per year. For buyers who meet the criteria, the government will finance five per cent of mortgages on existing homes and 10 per cent on those that have been newly-constructed.
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