A report issued by the "Royal Bank of Canada" expected the country to head towards a recession in 2023, but it will not last long and will not be as severe as previous recession periods.
 
Economists at the bank mentioned that rising food and energy prices, higher interest rates, and ongoing labor shortages will all push the Canadian economy toward a "moderate contraction" next year.

Economist Nathan Janzen said, "We see growth slowing down until the end of this year, but it remains positive, then we expect GDP to decline in the second and third quarters of 2023," according to the Associated Press.

He also mentioned that Canada will witness a slow increase in the unemployment rate, then a slight rise next year.

The bank, which is one of the largest banks in Canada, added that it expects the unemployment rate to reach 6.6 percent in 2023, but it does not believe it will take long to reverse this trend in 2024 and beyond.

The unemployment rate fell to 5.1 percent last May, the lowest level ever. Janzen said, "Labor markets will remain very strong in the near term, which is why we do not expect a downturn until next year. However, the pace of employment growth will begin to slow, but it is related to the limited supply of labor, not demand."

The bank said it is likely that the interest rate will increase by three-quarters of a percentage point next week, reflecting the move by the US Federal Reserve last month.

Janzen said the Bank of Canada is likely to raise interest rates by a similar amount in September, to 3.25 percent by the end of the year.