Canada is facing a challenging economic outlook, with a new report warning that the country could be stuck in a period of low growth and higher inflation for the next two decades. The study from Canadian financial firm Omnigence predicts a “protracted bout of stagflation” for Canada, characterized by stagnant real GDP per capita and rising inflation.
According to the report, Canada is expected to have the lowest real growth rate among countries in the Organisation for Economic Co-operation and Development over the next three years. This is compounded by a rapid rise in population, which is not factored into the growth projections. The country has been experiencing early onset stagflation for almost a decade, with GDP per capita remaining flat in U.S. dollar terms since 2013.
One of the key challenges facing Canada is its housing market, with a 3-million-home shortfall and no clear resolution in sight. This shortage contributes to inflation and diverts capital away from more productive activities. Canada also has the highest share of investment in housing in the OECD, making it overly reliant on real estate for GDP growth.
To navigate these economic challenges, the report suggests that investors consider real asset investments that have payoffs to inflation. Canada has an abundance of commodity or commodity-linked assets that perform well in inflationary environments. Examples include lower-cost food chains, automotive maintenance, and farmland.
Despite the economic headwinds, there are opportunities for growth in sectors less tied to traditional GDP metrics. Investments driven by aging demographics, the shrinking middle class, or exports to more robust economies could offer promising returns. The report advises investors to diversify their portfolios and consider alternative investment strategies to weather the economic uncertainty ahead.
Overall, the report paints a sobering picture of Canada’s economic future, highlighting the need for strategic planning and prudent investment decisions in the face of prolonged low growth and higher inflation.