Economists at the Bank of Montreal (BMO) are warning of an economic downturn in Canada during the first few months of 2023.
In a BMO Economics note to clients on Thursday, economists pointed to the largest generational rise of interest rates globally as the leading driver for a possible downturn.
“Stubborn inflation readings will force further tightening by the Bank of Canada through the remainder of 2022, and the combination will likely dent consumer spending, housing and business confidence,” Douglas Porter, the chief economist at BMO, said.  While provinces are expected to experience a slowdown, the report highlighted that some regions are more at risk.
British Columbia, Ontario and Quebec are most likely to experience an economic contraction the new year. A major drag for these three provinces will largely come from the housing sector as the rising interest rate environment is expected to trigger a correction, the note stated. 
Other regions, such as Alberta and Saskatchewan, will have the advantage of their natural resources. 
“Oil prices (in Alberta and Saskatchewan), while well off their highs, continue to support local activity, incomes and government revenues,” Porter explained. 
Atlantic Canada is likely to be aided by strong immigration and interprovincial travelling patterns, the report stated. 
So long as inflation runs rampant throughout Canada, the rising interest rate environment is expected to continue, according to BMO's economists. 
The Bank of Canada will announce its next rate decision on Wednesday.