Many economists will be watching to see how Finance Minister Chrystia Freeland navigates elevated recession risks in the federal government’s Fall Economic Statement this Thursday.

Last Friday, the feds said the “statement will provide information on the state of the Canadian economy within a challenging global environment and outline the government’s plan to continue building an economy that works for everyone.”

Rebekah Young, vice-president, head of inclusion and resilience economics at Bank of Nova Scotia, said the economic update will give “a peek at how federal finances are holding up against mounting economic headwinds.”

Young flagged that elevated recession risks “compounded by policy missteps” will most likely be at the top-of-mind for Freeland.

“We expect a cautious tone that largely holds the line on major new spending as the Canadian economy braces for landing, while laying the groundwork for a growth agenda in Budget 2023,” Young said in a note to clients Monday.



Robert Kavcic, director and senior economist at the Bank of Montreal said the economic update comes on the “heels of a better-than-expected result” for the financial year calendar of 2021 to 2022.

But looking ahead, he thinks “major positive fiscal revisions might be running their course.”

“The 2022 budget pegged this year’s deficit at $52.8 billion, which also looks on track for improvement,” Kavcic wrote in a note to clients on Friday.

“But, by FY23/24 (fiscal calendar year 2023 to 2024), our current economic outlook is now meaningfully more challenging than that assumed in the budget.”

He added that while this economic update is typically a venue for new policy announcements, recent comments from Freeland “suggest that the government will tread very cautiously—and rightfully so—on adding more stimulus right now.”



Young said she doesn’t expect to see any major new spending measures in the economic update.

“Minister Freeland has signalled as much on the stimulus side in the lead-up,” she said.

“She’s cautioned in a recent speech that affordability pressures will continue to pinch many pocketbooks, but that the government can no longer ‘support every single Canadian in the way we did with the emergency measures’ acknowledging the risk to inflation and interest rates.”

Young added that she expects the update will “likely to play up the $4.5 billion ($3.1 billion new) in measures announced earlier this fall under the Cost of Living Act,” which include a time-limited doubling of the GST credit, a one-time payment for renters and a dental benefit.

Prime Minister Justin Trudeau has already announced that the federal government would be “doubling the GST Tax Credit for six months for 11 million households.” He added that payments would start this Friday.

Kavcic said he thinks the economic update could be light on housing-related measures, as the 2022 budget already had several policies on that front.

“Market conditions have also changed since the budget, with prices now falling alongside higher mortgage rates,” Kavcic said over email on Wednesday.

“Also keep in mind that a few measures in the budget are set to go into force at the start of 2023 (eg, flipping tax and ban on non-resident buyers), so we’ll see if there are any changes on that front.”

There have been reports that the federal government is working to introduce more clean-energy tax credits in order to catch up with U.S. investments.

Cynthia Leach, assistant chief economist of thought leadership at the Royal Bank of Canada, said the fall economic statement needs to have accelerated clean tech spending.

“Canada needs to invest $2 trillion between now and 2050 to get to net zero, or about $80 billion per year,” Leach said in a note to clients on Tuesday.

She added that Canada needs to spend around $35 billion per year until 2030, with a focus on electricity, oil and gas, and transportation.

“At only $10 to 20 billion per year in current investment, deployment of green technologies needs to rise four to eight times above current levels,” Leach said.



The Canadian government has been warned by organizations like the International Monetary Fund (IMF) to resist the pressure to spend revenue windfalls.

“Revenue windfalls at both federal and provincial levels should be saved,” it said in the IMF’s annual Canadian mission statement last month.

“While some space could be made for limited and highly targeted programs to buffer vulnerable households from high fuel and food prices, more generalized spending increases should be avoided so as not to undercut monetary policy.”

Avery Shenfeld, chief economist at CIBC Capital Markets, said he hopes the federal government has learned from the U.K.’s recent economic turmoil, and avoid significant spending while the Bank of Canada works to cool inflation.

“The bottom line for all levels of government right now is to avoid large doses of fiscal stimulus while the Bank of Canada works to cool demand and bring inflation under control,” Shenfeld said over email on Tuesday.

“We're confident that the lessons from the U.K.'s short-lived experiment with ignoring that requirement have been well noted by our federal government.” 

BNN Bloomberg will have live coverage of the federal government's fall economic statement beginning at 3:55 p.m. on Thursday, both on-air and online.