Recession fears have waned after pandemic peaks, but economists warn a soft landing looks less likely in Canada. (GETTY)

Fears of a recession in Canada have fallen among business leaders since the early days of the COVID-19 pandemic, even as economists warn a soft landing is becoming a ‘distant prospect’ as banks central banks are accelerating interest rate hikes to tame the red inflation.

Modus Research asked a sample of 600 Canadian managers and executives to rate Canada’s chances of sliding into a recession in the next year. Thirty-eight percent of respondents to the poll released Thursday say such a slowdown is “very likely”.

That figure rose from 59% in May 2020, according to the Toronto-based agency.

“Since the spring of 2020, there has been a sharp drop in the number of Canadian business leaders who believe Canada is heading into a recession,” Modus said in a press release. “Although national media coverage of the issue has suggested that fears of a recession are high, they are well below the levels seen at the start of the pandemic.”

Modus says that before the pandemic, expectations for a recession were 18%.

“Worries about a recession remain well above pre-COVID levels and are not insignificant,” the agency added.

Regionally, recession fears among business leaders were strongest in the Prairies and Alberta, with 57% and 55%, respectively, saying a recession is “very likely”. Ontario followed with 36%. After Ontario, come British Columbia at 30%, Quebec at 29% and the Maritimes at 24%.

The survey found that household debt and “big business controlling too much of the market” were the top risks predicted for the Canadian economy over the next year, followed by labor shortages ( 51%), inflation (48%), rising interest rates (46%) and the residential real estate market (29%).

While Canadian leaders and managers may be sleeping easier now than the uncertain early days of the pandemic, economists are warning that the Bank of Canada’s steepest tightening cycle in decades will have consequences.

RBC chief economist Josh Nye calls for mild recessions in Canada, as well as the US, UK and Europe later this year or in 2023.

“With policymakers pledging to do what it takes to contain inflation, we believe a soft landing becomes a distant prospect,” he wrote in a note to clients on Monday.

The Bank of Canada is expected to make its next rate announcement on October 26.

Jeff Lagerquist is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jefflagerquist.

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