Need to know economic and financial terms for 2024

There is optimism in the air for 2024 for most Canadians. After battles with inflation, the housing crisis and many other economic issues, the general sentiment is that things can’t get much worse from here on out.

Experts are already predicting an easing of interest rates sometime within the year and a rebound in the economy. While many minds have already gone on to address the benefits, imaginary or otherwise that may stem from it, our article will stick to the economic and financial issues and news that could affect Canadians in 2024.

Inflation

Inflation has been the enigma plaguing the Canadian economy for the past couple years. The meteoric inflation could be attributed to the COVID-19 pandemic that shut down large sections of the economy. The resulting supply chain disruptions and the inability to keep up with a growing demand for goods set off a domino effect of inflating prices that were only brought under control by the Bank of Canada’s rate hikes throughout 2022- 2023.

As of December 2023, the Consumer Price Index was at 3.4% year-on-year with core good price, excluding the volatile energy and food sector at 2.2%.

The BoC is effectively on its last mile of interest rate cuts as inflation inches closer to the 2% target. Thus making 2024’s inflation trends a big factor to look out for.

The Interest Rate Conundrum

Canada’s central bank, the Bank of Canada, is responsible for the benchmark lending rates. The rates are altered to reflect the prevailing economic trends and used as a means to keep inflation in check. In 2023, the BoC imposed three rate hikes to bring the Interest rates up to 5%.

The big hope is that the cooling inflation will help the BoC bring down its lending rate and inject some life into the economy.

Recession

Most experts have rejected the notion of a full-scale recession, but Canada will most likely witness a downturn. Modest growth is projected for 2024 with the worst being a prolonged economic slowdown followed by a rebound.

The optimistic outlook is backed by Canada’s unlikely growth in GDP in December 2023, expanding 0.3% to narrowly avoid two consecutive quarters of contraction- known as a technical recession.

Housing Market Rebound

Many Canadians have been priced out of the housing market in recent years, with skyrocketing prices owing to supply side issues being a major root of the problem. The affordability issue has also been exacerbated by the inflated rental market which rents rising 8% In 2023.

The market has a lot of pent-up demand, that could be unleashed if the BoC’s interest rates fall.

“There will be a lot of pent-up demand to satisfy in the market once confidence returns, which could heat things up in a hurry” further adding, “poor affordability conditions will restrain the recovery.”

However, the risks of high demand heating prices further is expected to be balanced out by the cost of mortgage renewals, which could push more homeowners into listing their homes on the market- supplementing the supply of new homes.

The Assistant Chief Economist also expects home resales to rebound to 9.2% year-over-year in 2024.

In a sobering address, Tiff Macklem the Governor of the BoC, noted the Central Bank’s powerlessness in dealing with Canada’s current housing affordability crisis.

“Housing affordability is a significant problem in Canada—but not one that can be fixed by raising or lowering interest rates. Housing supply has fallen short of housing demand for many years,” noted Macklem. “There are many reasons why—zoning restrictions, delays and uncertainties in the approval process, and shortage of skilled workers. None of these are things monetary policy can address.”

Affordable Dental Care in 2024

The Canadian government is set to expand its Dental Benefits that will make dental care more accessible to over nine million uninsured Canadians with an annual family income below $90,000 with the Canadian Dental Care Plan.

The program will be opened in stages in 2024, covering various section of the population including those under the age of 18, seniors, people with disabilities, and ultimately all uninsured Canadians living below the income threshold etc.

Conclusion

The article should give you a brief idea of what 2024 could bring to the table. An easing at the macro-economic level should offer some respite to your financials and programs like the Dental Care Plan could altogether make 2024 a more affordable and tolerable experience.