Former Bank of Canada and Bank of England Governor Mark Carney says Canada is likely to go into recession next year, but will come out of it better than many other countries and bounce back faster due to its strong economic fundamentals.
Carney made the comments before the Senate Banking, Commerce and Economics Committee on Thursday. He also explained to parliamentarians why he believed outgoing British Prime Minister Liz Truss’ mini-budget had caused so much financial turmoil in her country.
“I think a recession is both likely globally and more likely in Canada,” Carney said.
“I would put it this way – I’m afraid it’s a bit like air travel these days. We know where we’re going, we just don’t know when we’re going to get there, so there’s some uncertainty as to the exact date time.”
Carney told senators that China is “effectively in a recession” now. Europe, he said, is going into recession and the UK is already in recession – and while US economic momentum is supporting Canada, it will be in recession “at some point” the next year.
“It’s going to be hard for us, [given] these cumulative factors, for Canada to be a complete exception to that,” he said. “The combination of all of this will likely result in a recession, at least a few quarters of negative growth in Canada.
This prediction is grimmer than the one Pierre-Olivier Gourinchas, chief economist of the International Monetary Fund, gave to CBC. Rosemary Barton live in an interview broadcast on Sunday.
“We expect a slowdown in Canada,” Gourinchas told Barton. “We see growth falling to around 1.5% next year, so that’s a downgrade.
“The Canadian economy has done well in the rebound, but is being buffeted by the same winds that are affecting the global economy.”
Gourinchas said that while unemployment in Canada and the United States will rise in the coming years, both labor markets are very strong and unemployment should “hopefully remain quite modest.”
Canada will recover faster: Carney
Carney cited a strong job market and low unemployment as reasons Canada will do better than other countries to weather the coming recession.
He said Canada’s labor market is strong because the country’s pandemic benefits, such as the Canada Emergency Wage Subsidy, have helped keep workers attached to their jobs, which means Canada lost fewer jobs than other countries.
Carney also said Canada’s international trade agreements with all other G7 countries and Pacific Rim nations will help it recover faster.
Watch: A recession is both likely globally and more likely in Canada,” says Mark Carney:
Former Bank of Canada and Bank of England governor Mark Carney told a Senate of Canada committee that Canada is likely to enter a recession next year, but will be better off than many other countries and would rebound faster.
“I don’t see any reason for there to be a problem with our bond rating or our credit rating or any sort of short-term problem,” he said.
And because the United States is doing better than other countries right now, Carney said, the strength of its economy should support the recovery in Canada.
“We can come out of this much stronger than others, no doubt, but we have to be clear-headed about where we’re headed,” he said.
“It’s a storm, not a hurricane. That’s how I would put it.”
Disorders in the UK and basic mathematics
Carney has also been asked by senators to explain recent financial and political turmoil in the UK.
Liz Truss announced on Thursday that she is stepping down as Prime Minister, just over six weeks after taking the reins of the Conservative Party as party leader. His resignation came after Kwasi Kwarteng resigned last week as Chancellor of the Exchequer, Britain’s finance minister.
Watch: Carney gives his take on Liz Truss:
Former Bank of Canada and Bank of England Governor Mark Carney says outgoing British Prime Minister Liz Truss’ failure to provide the costs of her mini-budget and her attempt to circumvent institutions parliamentarians had undermined his credibility.
Both saw their political careers explode after Kwarteng’s so-called September 23 mini-budget sent UK markets plummeting by offering deep tax cuts without explaining how they would be funded.
“I think one of the main reasons it failed is that it was half the story,” Carney said. “They focused on tax cuts as the solution, as opposed to any other hard work needed to increase productivity over time.”
Carney said the Truss government wanted to make a “big bang” with tax cuts and funding to help UK households pay rising energy costs before presenting another budget at the end of November that would have filled the gaps. holes.
Carney said Truss was never allowed to present that November budget because his government’s decision to announce unfunded tax relief made it look like he had a “trickle down, money-cutting strategy.” tax only”.
“Which in itself is not a credible strategy for a 21st century economy,” he said.
Carney said Truss’s failure to provide the cost of the cuts and his attempt to circumvent parliamentary institutions such as the UK equivalent of Canada’s Parliamentary Budget Officer undermined his credibility.
“They went to a deficit of 7% of GDP overnight. They already had a current account deficit of 7% and the numbers didn’t match. And then they acted like it didn’t matter “, did he declare.
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