Bank Of Canada Q2 2020 Market Participants Survey

The following are some of the ways to get in touch with each other: Market Participants Survey for the second quarter of 2024, conducted by the Bank of Canada from June 19 to 28, 2024, gathered insights from around 30 financial market participants on Canada’s economic conditions. Market participants include insurers, pension funds and other organizations active in the financial markets.

Economic Growth and its Risks

Survey respondents forecast Canada’s real GDP growth to have a median projection of 1.4% by the end of 2024, with the 25th and 75th percentiles at 0.9% and 1.7% respectively. By 2025, the median GDP growth is expected at 2.0%. This is followed by the 25th and 75th percentiles at 1.8% each. These projections indicate a modest growth in the economy over the next two-year period.

The survey asked respondents to describe the upside and downside risks they anticipated for their growth outlook.

Upside Risks

The respondents cited a strong housing sector (68%), a looser policy (56%) and higher commodity prices as the main factors that could boost economic performance.

Downside Risks

In contrast, the risks to growth reported by economists include a weaker real estate market (60%), an increase in geopolitical risks (48%) and a decline in purchasing power (40%) 

Inflation, Monetary Policy and Monetary Policy

CPI Inflation

Expectations of annual total CPI (Consumer Price Index), inflation in Canada, for the end 2024 are a median of 2,3%. The 25th and 75th percentiles are at 2.2% each. By 2025 the projected inflation rate is 2.1% with the 25th and 75th percentiles at 2.0% each. 

Rates of Interest on Policy

The Bank of Canada’s policy interest rates are projected to decline gradually over the coming years. In 2024, rates are expected to be 4.50% in July, 4.25% in September, and 4.00% by December. 

In 2025, the median rate is expected to drop from 4.00% at the beginning of January to 3.00% in the fourth quarter. By 2026’s first quarter, the median is expected to be at 3.00%. The survey participants generally see the risks surrounding these forecasts to be balanced. Forty percent of respondents viewed the risks as skewed in favor of higher rates while twenty percent viewed them as balanced.

Overall Economic Sentiment

Output Gap

A significant majority (79.2%), believes that Canada is currently experiencing an output gap. This means the current GDP levels are below potential output. Only 8.3% of respondents see a positive gap in output, while 12.5% do not.

Recession Probability

According to survey responses, Canada’s probability of entering a downturn within the next 12 months remains a cause for concern. Median estimates of the probability of a recession in Canada are 22,5% in the 0 to 6 month period, 30% in 6 to 12 months and 30% in 12 to 18 months.

For further details and responses on other key economic indicators, see the Bank of Canada’s Market Participants Survey results.