Deputy Prime Minister and Finance Minister Chrystia Freeland said she believes Canada is now facing the “final act of the COVID recession” amid economic challenges, but she believes Canadians will pull through.
“This is a period of economic turbulence,” said Freeland, speaking at a press conference on Monday. “This is the final act of the COVID recession.”
Freeland said she is not going to “sugarcoat” the current situation and Canadians will face “some challenging months ahead,” citing inflation and rising interest rates.
“Some people are going to see their mortgage payments rise and that is a challenge,” said Freeland.
Freeland said the Bank of Canada will continue to step on the economic brakes as it works to try to bring down inflation, which has already resulted in a slowdown in economic activity.
“I think we need to be collectively aware that is the challenge around the corner, and we just need to be prepared for that,” said Freeland. “Having said that, I also want to offer people some comfort and some confidence and the comfort is that, Canada’s economic fundamentals going into this challenging time, are really strong.”
Freeland added that once Canada gets through “this specific cycle of economic turbulence,” there will be a great opportunity for the country.
“Canada really is in a terrific place when it comes to critical minerals and metals when it comes to green energy,” she said. “Democracies around the world are really really keen to buy this stuff from democratic allies and what I really want to say to Canadians is let’s see this opportunity clearly.”
Canada, like much of the global economy, fell into recession shortly after the onset of the COVID-19 pandemic in 2020, as the spreading virus forced many businesses to shutter or operate with severe limitations.
The country’s economy rebounded in 2021, fuelled by high vaccination rates, loosened public health restrictions and a surging housing market stimulated by the Bank of Canada’s rock-bottom interest rates.
Policymakers at the central bank have drawn criticism in recent months for acting too late to raise the policy rate and take steam out of the economy.
Bank of Canada deputy governor Paul Beaudry recently conceded in a speech that inflation could have been limited if central banks and governments around the world had acted sooner to remove policies aimed at stimulating the economy through the COVID-19 pandemic.
The Bank of Canada now faces a narrowing window to hit a so-called “soft landing”, raising interest rates enough to tame inflation but not so much to push the economy into another recession.
— With files from Global’s Craig Lord