News release

Commodities and energy sectors will drive Canada’s economic growth in 2022, new report shows

Fragile economic conditions suggest Canada must strike a balance between short-term gains and long-term stability

May 17, 2022

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TORONTO, ON – (May 17, 2022) – RSM Canada ("RSM"), a leading global provider of audit, tax and consulting services focused on middle market businesses, today launched its second 2022 edition of ‘The Real Economy, Canada a quarterly report that provides Canadian businesses with economic analysis and insights into how the nation’s middle market can navigate through complex economic and geopolitical conditions.

With Canada playing a delicate economic balancing act between short-term growth and long-term stability, the second edition of this year’s ‘The Real Economy: Canada’ report examines the uncertain financial terrain ahead for Canadian businesses despite the competitive advantages held by the energy and commodities sectors, and to what extent inflation will be an economic factor for the rest of 2022.

The report also shines a light on how Canada stands to gain economically from swelling global agriculture commodity demand resulting from geopolitical tensions, the greater role federal and provincial governments will need to play in the clean energy transition, and how Canadian companies are attempting to integrate ESG principles into their operations and financial reporting.

Key findings in this quarter’s report include:

Canada’s middle market is bracing for tighter economic conditions

  • An overheated Canadian economy and global inflationary pressure have the Bank of Canada committed to increasing short-term interest rates and shrinking the size of its balance sheet.
  • Canadians can expect another rate hike in the Bank of Canada’s June announcement, though inflation will remain at six per cent for the coming months before effects of rising interest rates are felt.
  • Increased day-to-day costs and higher mortgage rates should dampen consumer spending and investment in the housing market, all of which should moderate growth and temper inflation.
  • Key indicators suggest that financial conditions are below normal, meaning a drag on the economy in the coming quarters is likely as the tendency to borrow or lend declines.

Canada is in a position to satisfy swelling global agricultural commodity demand as a result of Russia’s invasion of Ukraine ​

  • Canada produces many of the same agricultural products that are suddenly in short supply – such as potash, grains and cooking oils – and could be in position to replace some of the lost exports on the global market.
  • Canadian agricultural commodity producers stand to benefit from higher prices given high demand and strained supply abroad, with European companies already looking to secure contracts with Canada suppliers.
  • Canada and the United States can alleviate global food insecurity caused by geopolitical disruptions if they can increase production and exports of essential commodities.
  • However, achieving an increase in production will face obstacles, such as the of impact of higher North American labour and energy costs on commodity prices, and the impact of climate change on grain production.

Transition to clean energy and away from ballooning fuel costs will require greater government action​

  • Rising fuel costs – triggered by rising carbon tax rates and Russia’s war against Ukraine – is causing demand for electric vehicles to outstrip supply, rising faster than demand for gas vehicles.
  • However, Canadian oil consumption remains steady due to the lack of readily available fuel-efficient vehicles, indicating greater government investment and incentives are required to encourage a large-scale clean energy transition.
  • Despite current fuel prices, the federal carbon tax can help Canadian consumers and businesses transition from fluctuating oil and gas prices toward a more sustainable economy based on renewable energy.
  • Oil and gas have played a big role in Canada’s recent inflation surge, with just the exclusion of energy dropping Canada’s inflation number from 5.7 per cent to 4.4 per cent.

Canadian companies appear committed to sustainability, yet are unsure of how best to put ESG into practice

  • A 2021 RSM report showed dramatic rise in middle market business executives who said they were familiar with ESG, increasing from 39 per cent in the fourth quarter of 2019 to 69 per cent in the third quarter of 2021.
  • However, the practice of how firms integrate ESG at an operational level, including into the investment decision-making process, is still in its infancy.
  • Stakeholders are demanding that companies start to report on ESG factors in a much more structured way.
  • Businesses that wish to be serious about ESG must understand at a quantitative level how they embed sustainability into their operations and how they have aligned their success to their stakeholders’ success.
“Amid geopolitical tensions and surging inflation, the Canadian economy is well positioned to grow this year given its competitive advantages in the commodities and energy sectors,” says Tu Nguyen, economist and ESG director with RSM Canada. “For this reason, a rate hike is a given in the Bank of Canada’s next announcement in June, and a 50 basis-point increase would not be out of the question.”

Nguyen continues: “Russia’s invasion of Ukraine has destabilized global food markets by disrupting production and trade flows, putting Canada – as well as the United States – in a position to replace some of the agricultural products currently in short supply. North American businesses that produce agricultural commodities will need to look ahead and prepare accordingly, whether by increasing production or securing future contracts, as global food supplies are disrupted into next year.”

For more information on RSM Canada’s ‘The Real Economy: Canada’, or to download the report, please visit our webpage.

About RSM Canada

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RSM Canada LLP provides public accounting services and is the Canadian member firm of RSM International, a global network of independent assurance, tax and consulting firms with 64,000 people in 120 countries. RSM Canada Consulting LP provides consulting services and is an affiliate of RSM US LLP, a member firm of RSM International. For more information visit, like us on Facebook, follow us on X and/or connect with us on LinkedIn.