The chief economist with Farm Credit Canada says we are better off in the ag sector with a low Canadian dollar to the U-S.
The lower Canadian dollar makes our products more competitive in the global market.
J.P. Gervais expects to see a decline in the Loonie for the first half of the year before starting to recover/
"There will likely be a global economic slowdown of some kind. We've seen central banks across the world, it's not just happening in Canada and the US, raise interest rates to rein in inflation in all parts of the world really. So that should in and of itself slow down economic growth to the point that perhaps the demand for oil could slow down as well a little bit. And that explains sort of the drop in the first six months of the year for the loonie in our forecast."
In terms of the overall global economy, Gervais believes it will start to gain strength in the second half of 2023.
There's a lot of concern about a recession and what that will mean.
Gervais says while we'll see a slowdown, it will be different from what we've seen in the past because the labor market is so strong.
Typically during a recession, we see fewer jobs and higher unemployment.
He says when you look at job vacancy rates we see a labor shortage in all levels of the agri-food supply chain, from input suppliers to primary production, trucking and transportation right down to retail and food services.
Another key concern has been around interest rates.
"I definitely can see long-term rates, a five-year rate, for example, come down and under 25/50 basis points. Absolutely, in 2023, it's entirely possible. But for the most part, we've seen what we had to see. The idea is that if you stick with short-term rates there's always the risk of seeing rates move a little bit higher if inflation is not responding to what we have currently."
Gervais cautions there's still an upside risk of higher interest rates if inflation doesn't come down, he thinks it will but notes there's always a risk.
FCC's 2023 Economic Outlook can be found here.