Governments are going to have to address sluggish productivity growth. Either that or get turfed at the polls

Last week, I summed up 2023 as a year of poor economic performance, with high interest rates, declining real per capita GDP and shortages of housing and health care. Should we expect more of the same from 2024 or something better and brighter?

On the economic side, the most important wind of change will be a shift from rising to falling interest rates. BMO forecasts CPI growth at close to 2.8 per cent in Canada, 1.1 percentage points lower than in 2023 though still higher than the Bank of Canada’s two per cent target. BMO thinks interest rates, including mortgage rates, will edge down by roughly a point, buoying stock and bond markets that were flat through most of 2023 after a disastrous 2022.

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Although high interest rates have made headway in controlling inflation, they come at a cost. BMO predicts Canada’s GDP growth will fall to 0.5 per cent (from just one per cent this year) even with continuing high immigration levels. Per capita GDP will thus likely take a hit again, falling by at least two per cent, and the unemployment rate could edge up by a point to 6.4 per cent. That means the “misery index” — the sum of the inflation and unemployment rates — will remain virtually unchanged (9.2 per cent in 2024 vs. 9.3 per cent in 2023).

With the Bank of Canada, like other central banks, focused on its........

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