Here’s what a global recession could mean for Saskatchewan

Talk of a global recession in 2023 remains relatively strong as the calendar enters the second month of the year.

dr Jason Childs, associate professor of economics at the University of Regina, agreed that given the current circumstances, a global recession is very likely.

“I think it varies regionally, of course, but I think it’s still quite likely,” Childs said.

Childs said many signs continue to point to an economic slowdown around the world as businesses that he believes would have been wasted in normal times could begin to fail now that support from the pandemic is gone.

“Companies that would have failed in normal times survived because they were props up during the pandemic and now those various props are gone and we’re likely to see a series of failures [all at once] that would have been spread out over two or three years,” he said.

While Saskatchewan isn’t recession-proof, it’s a province that can, for a variety of reasons, be resilient in tough economic times.

According to Childs, Saskatchewan virtually dodged a global recession in some aspects in 2008.

“What happened then was that commodity prices stayed high because there was this building space where governments, including Canada’s, decided to spend really aggressively on things like infrastructure and other commodities,” Childs said.

A pumpjack works on a wellhead at an oil and gas facility near Cremona, Alta, Saturday, October 29, 2016. (THE CANADIAN PRESS/Jeff McIntosh)

Childs explained that he is currently closely monitoring China, which appears to be lifting strict COVID-19 lockdowns and rejoining the global economy.

“So they’re going to come back and put themselves back into the global economy, which should lead to an increase in demand for commodities, including the things that we produce here in Saskatchewan,” Childs said.

According to Childs, this could help Saskatchewan navigate a global recession better than other parts of the country and world.

What needs to happen for a recession to set in is two consecutive quarters of negative GDP growth.

“That means we have less economic activity and it is [the economy] shrink,” he explained.

Childs said that during this period there is also a rise in unemployment and price stabilization with inflation vanishing in most scenarios.

“Recessions are usually tough for the stock market. So you might see some stocks becoming a better value proposition. It [a recession] tends to tame inflation.”

With many people also concerned about house prices and interest rates lately, Childs said a potential recession probably wouldn’t hurt Saskatchewan house prices much.

“It could do more in, say, Vancouver or Toronto, where we have to challenge that huge international component, compared to Saskatchewan, it’s not that big overall.

Childs said the Bank of Canada’s rate hikes in 2022 could potentially produce a “soft landing” that slows inflation just enough not to trigger a recession, but it’s not a scenario he thinks is likely to materialize .

“I’m not optimistic, but some people are,” he said.

Source: regina.ctvnews.ca