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Tepid economic growth in Canada to resume in the second half of 2009

Ottawa, ON -- The Canadian economy is expected to begin growing in the second half of this year, but the effects of...


Ottawa, ON — The Canadian economy is expected to begin growing in the second half of this year, but the effects of the global recession will linger into 2010 and the recovery will be slow, according to the Conference Board’s Canadian Outlook – Summer 2009.

 

“The current recession is so widespread that its effects are expected to linger for longer than the typical business cycle,” said Pedro Antunes, director, National and Provincial Forecast. “Although the US economy is forecast to return to growth in the second half of this year, battered American consumers will be saving more of their incomes in the foreseeable future. As a result, the global recovery will be soft, and Canada is not expected to achieve economic growth significantly above its potential until at least 2011.”

 

Real gross domestic product in Canada will fall by 1.9% in 2009. In 2010, the Canadian economy is forecast to grow by 2.7% — still much weaker than typical post-recession growth. In both Canada and the US, consumer confidence has partially recovered from the depths that it reached last winter. Consumer spending will grow modestly next year, following a decline in 2009. The main contributors to the rebound in 2010 will be strong growth in public infrastructure spending and a recovery in both resource prices and exports.

 

Canadian exports are expected to decline for the second consecutive year — by 14.2% in 2009. However, exports are forecast to grow by 2.8% in 2010. U.S. housing starts and automobile sales, currently at rock-bottom levels, can only rise — albeit slowly. Canadian exporters of automobiles, lumber and construction materials have been through the worst of the business cycle.

 

Infrastructure spending, record-low interest rates and other government initiatives will provide a much-needed short-term boost to the economy. The Conference Board forecasts that the federal government could rebalance its books as the economy recovers and temporary stimulus measures, such as infrastructure spending and tax incentives, are eliminated. On the other hand, the provincial governments as a whole will not be able to achieve surpluses in the future without tax or spending changes, the Board predicts.