Ottawa, ON — The Canadian economy will be hit by several speed bumps in the first two quarters of 2007, resulting in slower growth for the year as a whole and slightly higher unemployment, the Canadian Chamber of Commerce says in its annual Economic Review and Outlook.
The Canadian Chamber says Canada’s average annual real GDP growth will be 2.8% in 2006 when all the numbers are counted, but that GDP growth will slow to 2.4% in 2007. There are several factors for the projected slowdown, but key is lower U.S. demand for Canadian exports as a result of continuing economic weakness south of the border.
The Chamber projects that the Canadian economy will limp home as 2006 concludes, struggling to reach 2% growth in the final quarter. The weakness is anticipated to continue during the first half of 2007, before rebounding in the latter half of the year.
Other projections in the Chamber’s Economic Review and Outlook include:
The unemployment rate is expected to be 6.4% in 2007, up from 6.3% in 2006.
The Canadian dollar will trade in a range of 86 cents and 89 cents U.S. in 2007.
Canada’s central bank is expected to cut interest rates by a cumulative 50 basis points in the spring of 2007.
The Canadian economy could be even weaker than projected if the U.S. downturn proves sharper than anticipated.
The Chamber’s analysis shows that Ontario and Quebec, the manufacturing hub of Canada, will continue to bear the brunt of the U.S. slowdown as declining demand south of the border continues to impact exports of manufactured goods.
“This is not the Christmas present Canadians are looking for, but it’s far from a lump of coal,” said Nancy Hughes Anthony, President and CEO of the Canadian Chamber. “It’s important to note that although the economy has slowed down, we are still realizing positive growth.
“The Outlook is another reminder that our economic performance can be sidetracked by world trends, so it’s important that we in Canada take the necessary steps to ensure we continue to perform well and maintain our standard of living. These include lowering taxes for individuals and corporations, keeping government spending in check, removing unnecessary regulations, maximizing on opportunities to increase our trading relationships, and making the kind of investments that will improve productivity, such as in education, R&D, and infrastructure.”
The full report is available on the Canadian Chamber website, www.chamber.ca.