Canadian Corporate Credit—Outlook for 2023
DBRS Morningstar released a commentary titled “Canadian Corporate Credit—Outlook for 2023.” Consistent with DBRS Morningstar’s “North America Macroeconomic Update: Slowing Growth, Slowing Inflation” (December 14, 2022), the prognosis for Canadian economic growth in 2023 is weak. If Canada enters recession, it is likely to be short and shallow, although risks are skewed to the downside. Given this context, DBRS Morningstar argues that the Canadian corporate credit landscape can be divided into three categories:(1) Sectors facing the most significant challenges.
(2) Sectors with more balanced outlooks.
(3) Sectors that are likely to do well in 2023.
“Sectors that are associated with consumer discretionary spending, related to homebuilding, driven by capital investment trends in highly volatile commodity markets with uncertain near-term outlooks, and/or those with rising costs of capital and significant capital spending requirements are likely to face the greatest challenges in 2023, from a credit perspective,” according to Tim O’Brien, Global Head of Diversified Industries.
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