No one can predict what\u2019s in store for the Canadian economy in 2023, but having a general idea of what\u2019s coming can help you prepare. If you can gird your finances for a little more turmoil at the outset of the year, the relative calm we expect to follow should be even sweeter.<\/p>\n\n\n\n
1. Recession is coming, though it will be mild and short-lived<\/h2>\n\n\n\n
Shannon Terrell: <\/strong>As far as a Canadian recession<\/a> is concerned, it\u2019s not so much a question of if, but of when. In the wake of numerous Bank of Canada rate hikes, a moderate recession next year is expected. Perhaps more important is whether 2023\u2019s forecasted downturn will cripple the Canadian economy. Most analysts say no. Here\u2019s why.<\/p>\n\n\n\n Right now, the Canadian job market is strong. Our labour market grew by 108,000 positions in October, and unemployment held steady at 5.2%. These are good numbers \u2014 promising numbers. And Canada\u2019s job market is really the linchpin of our recession resilience. We could see unemployment rise as high as 6.5% in 2023, but truth be told, we\u2019re well-positioned to navigate a moderate economic downturn. <\/p>\n\n\n\n As for timing, analysts from RBC and Scotiabank think Canada will enter a recession within the first three months of 2023. By midyear, we can expect to see some turnaround in the economy. <\/p>\n\n\n\n How to handle it: <\/strong>Consider starting (or beefing up) an emergency fund<\/a>. Having some money tucked away in case of job loss or rising expenses can provide much-needed peace of mind. You may also want to assess your debt<\/a>, specifically: debt with variable interest rates. In the event of economic turbulence, variable-rate debt is akin to throwing an unpredictable (and expensive) wrench into your finances. Prioritize paying down high-interest and variable-rate debt to prepare for economic uncertainty. <\/p>\n\n\n\n Clay Jarvis:<\/strong> The Bank of Canada said in its most recent Monetary Policy Report that it expects inflation<\/a> to fall to \u201cabout 3%\u201d in late 2023. That would mean lower prices on essentials<\/a> for consumers and lower interest rates for borrowers, particularly those seeking variable-rate mortgages. <\/p>\n\n\n\n I\u2019m skeptical that the Bank of Canada\u2019s rate hikes will bring inflation down that quickly. The Bank increased the overnight rate seven times in 2022, from 0.25% to 4.25%, and inflation is still running hot. It’s down from a July peak of 8.1%, but inflation was still an eye-watering 6.9% in October, and has been in that general range since August.<\/p>\n\n\n\n Fuelled by non-economic factors this time around, like the invasion of Ukraine and COVID lockdowns in China, it\u2019s fair to wonder if a purely economic response like raising interest rates will be enough to tame inflation by year-end. I don\u2019t think so, but if inflation begins receding in the early part of 2023, it\u2019ll give the Bank a reason to pause its rate increases and consider reducing the overnight rate \u2014 by a minimal amount \u2014 by late-2023.<\/p>\n\n\n\n How to handle it:<\/strong> High interest rates on savings accounts<\/a> and term deposits<\/a> aren\u2019t likely to last through the end of 2023, so take advantage while you can. Guaranteed investment certificates<\/a>, for example, are worth a look in a high-rate environment.<\/p>\n\n\n\n Shannon Terrell:<\/strong> It\u2019s no secret that 2022 wasn\u2019t been the best year for investors. Year-to-date, all the major stock indices in Canada and the US are down. In fact, many are poised to ring in the new year with less value than they had at its outset. Markets have been volatile, with yo-yo-ing stock prices exacerbated by white-hot inflation and aggressive interest rate hikes from central banks. <\/p>\n\n\n\n The good news? Things look bullish for investors next year \u2014 at least in Canada. Numerous analysts suggest US markets will continue their volatile ride into 2023, but predictions for Canadian markets are optimistic. So optimistic, in fact, that some strategists suggest the Toronto Stock Exchange<\/a> will hit a record peak in 2023 in response to elevated prices for commodities and energy products.<\/p>\n\n\n\n Now, don\u2019t get me wrong \u2014 we will likely still see some volatility, especially in the face of a potential recession. But what\u2019s important to remember is that Canada\u2019s benchmark index, the S&P\/TSX composite, is more heavily weighted towards the financial and energy sectors than the S&P 500. This will give the Canadian market an edge over its American counterpart in 2023.<\/p>\n\n\n\n How to handle it: <\/strong>No matter how the market pivots, there\u2019s little to be gained from panic selling. Most investors are in it for the long haul anyway, so if you consider yourself a buy-and-hold investor, make sure you feel comfortable riding out the natural highs and lows of the market. You may see some of your investments lose money, but selling when the market is down only locks in your losses. The portfolio best positioned to weather volatility is a diversified one. <\/p>\n\n\n\n Clay Jarvis: <\/strong>Don\u2019t let the collapse in sales seen in the latter half of 2022 fool you: The Canadian real estate<\/a> market will be just fine in 2023. <\/p>\n\n\n\n Buyers will likely be dealing with prohibitively high mortgage rates<\/a> for the first half or two-thirds of 2023, but once rates start ticking down and buying power begins increasing, I think you\u2019ll see an immediate rebound in sales and prices. The size of those rebounds will be determined by how much buyers are able to borrow.<\/p>\n\n\n\n After a projected drop of 20% in 2022, the Canadian Real Estate Association expects sales to decline by just 2.3% in 2023. That\u2019s not a change that will show up in prices, which is why CREA is projecting a minuscule increase of 0.2% for the national average sale price next year. <\/p>\n\n\n\n Those numbers sound about right to me. The first several months of 2023 should be similar to what we saw in late 2022, and slumping sales will probably offset whatever gains the market experiences later in the year. Don\u2019t forget that Canada will be welcoming around 465,000 new arrivals next year; those in a position to buy will put more upward pressure on prices and sales.<\/p>\n\n\n\n How to handle it:<\/strong> If you\u2019re not in a position to buy a home now, your situation may not improve much for the next several months. Use that time to shore up your finances \u2014 pay down some debt, shift your down payment savings into a high-interest savings account<\/a> or GIC \u2014 and hit the ground running when the market becomes more welcoming.<\/p>\n\n\n\n Shannon Terrell: <\/strong>In October, Canadian business owners were given the option to pass credit card processing fees of up to 2.4% on to their customers. These processing fees<\/a> cover the costs of using credit card networks and, until now, were paid by merchants. But here\u2019s the thing: only 19% of small businesses said they planned to charge the fee, according to a September 2022 survey conducted by the Canadian Federation of Independent Businesses.<\/p>\n\n\n\n That means over 80% of small businesses surveyed said they didn\u2019t plan to implement the fee \u2014 at least, not yet. Why the hesitation? I think Canadian business owners got cold feet ahead of the holiday rush. <\/p>\n\n\n\n The end of the year is often a make-or-break time for many businesses. Do you risk losing customers during a critical profit-making window? Probably not. <\/p>\n\n\n\n I suspect we\u2019ll see wider adoption of processing fees in 2023. But we may also see a rise in alternative forms of payment that bypass the fee, like \u201cbuy now, pay later<\/a>\u201d installment loans and Interac e-Transfers. One example is Clik2pay, a payments service that lets businesses accept customer payments in person and online via Interac e-Transfer. In the new year, I expect we\u2019ll see more of these alternative payment options gain traction \u2014 alongside credit card processing fees.<\/p>\n\n\n\n How to handle it: <\/strong>Business owners, don\u2019t be afraid to explore alternative forms of payment processing to appeal to a broader range of clientele. Consumers, learn how to spot processing fees before you commit to a purchase and take time to comparison shop. It may also pay to have alternative forms of payment on hand, like cash.<\/p>\n\n\n\n Clay Jarvis: <\/strong>Rather than play the role of disruptor, cryptocurrency<\/a> disrupted itself in 2022. The losses that wallopped Bitcoin, Ether, and many other tokens magnified the sector\u2019s inherent unpredictability. The multibillion-dollar collapse of cryptocurrency exchange FTX in November exposed the corruption and mismanagement at the heart of one of the space\u2019s formerly biggest players. <\/p>\n\n\n\n While blockchain is being more widely implemented, and Canadian financial institutions are experimenting with their own digital currencies, the cryptocurrency many investors are familiar with \u2014 speculative digital assets with a value of\u2026what exactly? \u2014 will remain a fringe asset in 2023.<\/p>\n\n\n\n There\u2019s just not enough regulation around crypto to warrant an imminent, open-arms welcome from Canada\u2019s conservative banking system. Fraud remains an issue, as do sudden, inexplicable price crashes. Those risks are amplified by the fact that crypto assets are not eligible for deposit insurance in Canada. Cryptocurrencies were also recently identified as both \u201ctargets and tools\u201d of cyber criminals by the Canadian Centre for Cyber Security.<\/p>\n\n\n\n I doubt that those issues will be resolved in 2023, but it could still be a big year for the crypto industry. The federal government recently announced that it is consulting with stakeholders on digital currencies, including cryptocurrencies, which is an acknowledgement that crypto could be here to stay \u2014 once the kinks are ironed out. That kind of positive momentum should be music to investors\u2019 ears.<\/p>\n\n\n\n How to handle it:<\/strong> No matter what crypto asset you consider investing in \u2014 a coin, stock in a promising blockchain company \u2014 doing your homework is more important than ever. In addition to vetting the investment itself, make sure you can retrieve your assets from wherever you store or trade them in the event of a meltdown.<\/p>\n\n\n\n Clay Jarvis is NerdWallet\u2019s mortgage and real estate expert in Canada. Thus far, his entire professional writing career has revolved around real estate. Prior to joining NerdWallet, he was the…<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Clay Jarvis and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t\t\t Shannon Terrell is a lead writer and spokesperson for NerdWallet, where she writes about credit cards and personal finance. Previously, she was a writer, editor and video host for financial…<\/p>\n\t\t\t\t\t\t\t\t\t\t\t\t\n\t\t\t\t\t\t\tRead more about Shannon Terrell and explore their articles<\/span>\n\t\t\t\t\t\t<\/a>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t<\/div>\n\t\t\t<\/div>\n<\/div>\n\n\n\n\t Get proactive to steer your finances through rocky economic conditions like a pro.<\/p>\n\t<\/div>\n\n\t Rising interest rates, lower risk, and a guaranteed rate of return make GICs more attractive. Here are three reasons to add one to your portfolio.<\/p>\n\t<\/div>\n\n\t A “housing crash” and a “housing correction” differ in how they\u2019re caused, and the severity of their effect on home prices and sales.<\/p>\n\t<\/div>\n\n\t The deal is expected to close by the end of March 2024, at which time HSBC Canada banking, investment and lending products will migrate to RBC.<\/p>\n\t<\/div>\n\n\t Persistent inflation and a minor recession are expected in 2023, but so is increased stability in the housing and stock markets. Start preparing your finances now and you could take advantage of the uncertainty.<\/p>\n","protected":false},"author":26,"featured_media":17099,"parent":104,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"page-templates\/article-sidebar.php","meta":{"_acf_changed":false,"om_disable_all_campaigns":false,"apple_news_api_created_at":"","apple_news_api_id":"","apple_news_api_modified_at":"","apple_news_api_revision":"","apple_news_api_share_url":"","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_is_hidden":false,"apple_news_is_paid":false,"apple_news_is_preview":false,"apple_news_is_sponsored":false,"apple_news_maturity_rating":"GENERAL","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"","apple_news_slug":"","apple_news_sections":"[\"https:\\\/\\\/news-api.apple.com\\\/sections\\\/258a2d7c-962b-47be-93aa-4e3a3f4b4a02\",\"https:\\\/\\\/news-api.apple.com\\\/sections\\\/76919044-3bb4-46ec-8cd0-168bc6bc224f\"]","apple_news_suppress_video_url":false,"apple_news_use_image_component":false,"footnotes":"","_nw_pros_cons_block_schema":""},"content-classification":[13],"topic":[267],"cluster":[268],"pp_author":[87,86],"acf":[],"apple_news_notices":[],"yoast_head":"\n2. Inflation and interest rates will come down \u2014 eventually<\/h2>\n\n\n\n
3. Stock market volatility will give way to substantial growth \u2014 at least in Canada<\/h2>\n\n\n\n
4. The Canadian housing market will stabilize<\/h2>\n\n\n\n
5. More businesses will introduce Canada\u2019s new credit card fee<\/h2>\n\n\n\n
6. Crypto will remain on the fringes of the financial system<\/h2>\n\n\n\n
\n\t\t\tAbout the Authors\t\t<\/h4>\n\n\t\t\t\t\t
\n\t\t\t\tDIVE EVEN DEEPER\t\t\t<\/h4>\n\t\t\n\t\t
![\"5](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/09\/GettyImages-1215619152-e1663254768595-460x198.jpg\")
\t<\/a>\n\t\t\t\n\t\n\t\t5 Recession-Ready Tips for Savers and Investors\t<\/a>\n<\/h4>\n\n\t
![\"\"](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/03\/Shannon-Terrell-headshot-e1648578818586-40x40.png\")
Shannon Terrell<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>![\"Why](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/07\/GettyImages-1340530044-e1657219349852-460x198.jpg\")
\t<\/a>\n\t\t\t\n\t\n\t\tWhy Now Might Be a Good Time to Buy a GIC\t<\/a>\n<\/h4>\n\n\t
![\"\"](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2021\/07\/Sandra-MacGregor-e1626212852416-40x40.jpg\")
Sandra MacGregor<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>![\"Is](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/08\/GettyImages-944039306-e1661979027872-460x198.jpg\")
\t<\/a>\n\t\t\t\n\t\n\t\tIs Canada’s Housing Market Crashing? Here’s How to Tell\t<\/a>\n<\/h4>\n\n\t
![\"\"](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/03\/IMG_20220329_114424-150x150.jpg\")
Clay Jarvis<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>![\"What](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/12\/GettyImages-1153500183-435x290.jpg\")
\t<\/a>\n\t\t\t\n\t\n\t\tWhat HSBC Customers Need to Know About the RBC Deal\t<\/a>\n<\/h4>\n\n\t
Shannon Terrell<\/a>![\"\"](\"https:\/\/www.nerdwallet.com\/ca\/wp-content\/uploads\/sites\/2\/2022\/03\/Headshot_Siddhi-Jahagirdar-e1648746969870-40x40.jpg\")
Siddhi Bagwe<\/a>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t<\/div>\n\t\t<\/div>\n\t<\/div>\n<\/div>\n<\/div>\t\t<\/div>\n\t<\/section>\n\n","protected":false},"excerpt":{"rendered":"