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The Bank of Canada (BoC) has released its quarterly market participant survey, revealing that most financial experts expect Canada’s economic growth to be sluggish. Real GDP is projected to grow by just 1-2% in 2024, significantly behind global growth forecasts, with a similar trend for 2025. This weak performance is largely attributed to low productivity, with the majority of experts forecasting GDP output to remain below its potential.

Despite the subdued economic outlook, the BoC’s interest rates are expected to stay higher for longer than many anticipated. Experts forecast a gradual decline in rates, with the median estimate predicting a drop to 2.75% by the end of 2025, but rates are not expected to return to pre-pandemic levels until at least 2026. This suggests that while the economy may be growing slowly, it won’t see a drastic reduction in rates in the near future.

The BoC’s higher interest rates, which are above pre-pandemic levels, reflect a robust demand that continues to drive inflation. While these rates are seen as a negative by some policymakers, they indicate an economy that remains strong enough to support such levels, and suggest an economy capable of paying depositors interest rates above inflation. This points to a more optimistic outlook, even though it may seem contrary to popular expectations.

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