Canada’s overstimulated economy is experiencing withdrawal from the end of low interest rates, according to Oxford Economics (OE), which has warned investors that the country is already in recession.

The firm expects Canada to spend most of 2023 in recession, and that it will be hit harder than its G7 peers. Highly indebted households and overpriced real estate shouldn’t expect much relief either. Elevated inflation will limit stimulus and prevent cuts to interest rates in 2023.

Canada is expected to see a moderate recession, and it’s already kicked off, says OE. The company forecast real gross domestic product (GDP) will contract 1.3% in 2023, below consensus, stating: ‘Recession is expected throughout next year, with real GDP falling 2.3% from Q4 2022 to Q3 2023. It might not sound like much, but keep in mind that’s after a substantial inflation adjustment. High inflation and aggressive monetary tightening required to cool it, are the causes. Lower household spending, and a real estate slump provide additional downward pressure. More leverage means amplified gains in a bull market, and amplified losses in a downturn.’