Expect a mild recession in the first half of 2023

Published February 8, 2023

Michael Lawrence, CFP®, CIM®

Canada is likely headed into a recession in the first half of 2023. As unsettling as that may sound, recessions are a normal part of the economic cycle and serve to ease factors such as high inflation and elevated housing prices and rents.

A recession is defined as a temporary decline in Gross Domestic Product (GDP). Its generally accepted that a 'temporary decline' is two consecutive quarters or six months. GDP is the value of all goods and services produced in our economy.

What can I do to prepare?

Start by asking yourself how a recession could affect your income. Are you on a fixed or variable income? Do you run your own business? Are you in an industry that is sensitive to economic downturns? If you conclude a recession is likely to impact your livelihood, it might be wise to start thinking about how you can earn extra income. Alternatives can include freelancing, taking up a side hustle, joining the gig economy, tutoring, or even renting a spare room in your basement.

What to do if you find yourself unemployed

If you do lose your job, ensure you sign up for employment insurance (EI) right away if you are qualified. There is a waiting period before you start to receive this government benefit so it's best not to delay if you're relying on this income to meet daily expenses. You may also be eligible for termination pay, vacation pay, and/or severance pay.

To supplement your income, you may need to dig into your emergency fund. Remember, that’s what it's there for. This will likely be a better strategy than selling investments that could be at depressed valuations. When you get back on your feet, ensure you have a plan to replenish your emergency fund so that its ready the next time you need it.

Bottom Line

Recessions are a normal part of the economic cycle, and they can produce opportunities for individuals and businesses. Allowing the economy to heal itself in terms of reduced inflation (lower gas and food prices) will benefit us all in the long run.