Inflation, interest rates to constrict growth in Canadian cities in 2023

Canadian cities will see slow growth throughout 2023 as higher borrowing costs and inflation continue to affect local economies, according to research by the Conference Board of Canada.

“Major cities across Canada have largely recovered from the impacts of the pandemic, but new challenges are on the horizon,” said Jane McIntyre, principal economist at the Conference Board of Canada.

"Reduced consumer confidence across most of the country, inflation, and constricted labour markets will hamper growth in most cities."

Highlights of the CBoC research:

  • High interest rates are starting to cool local housing demand, and the national economy’s slowing will trim Calgary’s forecasted GDP growth in 2023 to 2.4 per cent but will increase to 2.8 per cent in 2024
  • Despite the city’s existing housing market being in full retreat, Edmonton is still seeing an influx of prospective home buyers from British Columbia and Ontario. GDP growth for the city is forecast to reach 1.8 per cent in 2023
  • With global demand increasing for many of Saskatchewan’s resources, Saskatoon is set to benefit from this spillover. GDP is forecast to advance by 1.2 per cent in 2023
  • The CentrePort Canada Rail Park is currently under construction and represents a large-scale investment project that will boost some of Winnipeg’s key sectors including transportation and warehousing. Real GDP is expected to rise by 0.9 per cent in 2023 and 2.4 per cent in 2024
  • Stronger commodity prices are boosting Saskatchewan’s economy, and the benefits are flowing into Regina, its provincial capital. However, hampered by the national and international backdrop, GDP is forecast to grow just 0.8 per cent in 2023 before increasing 2.4 per cent in 2024
  • Output in services such as restaurants, hospitality, and recreation will be growth leaders in 2023 in Hamilton. However, slowing demand nationally will affect the region, which will see growth of just 0.8 per cent in 2023 before increasing 2.7 per cent in 2024
  • Ottawa-Gatineau’s population gains look favourable, which will keep the region’s residential construction in good shape in 2023. GDP for the city is forecast to be sluggish this year, growing just 0.8 per cent before expanding 2 per cent in 2024
  • Net interprovincial and intercity migration will benefit Victoria’s population numbers in the coming years, but inflation’s weight is expected to slow the city’s growth to just 0.7 per cent in 2023 before expanding to 2.4 per cent in 2024
  • Halifax’s tourism sector should see another strong summer season in 2023 as inflation continues to cool, but the overall slower growth for the city is forecasted to keep GDP growth at 0.7 per cent in 2023 before rising to 2.2 per cent in 2024
  • Montreal’s GDP growth is expected to slow significantly in 2023 to just 0.7 per cent, due to a combination of high interest rates, low consumer confidence and low immigration compared to other regions in CanadaA host of international and domestic challenges will affect Toronto’s GDP growth in 2023 to just 0.6 per cent, but most of these issues are expected to subside in 2024 and help GDP climb by 2.9 per cent
  • Reduced purchasing power for consumers and higher borrowing costs for businesses will both have a major hand in dampening GDP in Vancouver, which is expected so see growth of just 0.5 per cent in 2023 and 2.8 per cent in 2024
  • Weakening consumer demand due to inflation and high borrowing costs will slow gains in Quebec City’s servicing producing industries, and the economy overall, which is forecasted to see GDP growth of just 0.4 per cent in 2023