Canada Business Forecast Report Q3 2013: New research report available at Fast Market Research
New Country Reports research report from Business Monitor International is now available from Fast Market Research
[USPRwire, Thu May 23 2013] The Canadian economy will continue to slow down in 2013 due to weakening residential construction and household consumption, but is expected to avoid falling into recession. The mix of growth will continue to shift away from private consumption as household balance sheets remain under pressure.
With a strong Canadian dollar and low interest rates, business investment will be a major driver of growth; however, the trade balance will remain in deficit. Risks to the Canadian dollar are balanced towards weakness.
Among developed states, and in stark contrast to the neighbouring US, Canada has an enviable fiscal record. We see very limited risk of a Canadian fiscal crisis and see the federal budget balance returning to surplus by 2016-2017.
We now forecast 2013 growth of 1.5% (down from 1.9% previously), following 1.8% growth in 2012 (we had expected 2.0% expansion). For 2014, we see an improvement to 2.1%, but this is a downgrade from our previous 2.5% forecast.
We have pushed back our expectation for the next Bank of Canada rate hike to 2015, from mid-2014 in our previous set of forecasts.
Key Risks To Outlook
Downside Risks To Growth Forecast: A collapse of the European monetary union would send shock waves through global trade and financial markets. A hard economic landing in China would hurt demand for commodities, in turn affecting Canada's terms of trade. Weakness in the domestic real estate market also poses a threat.
Downside Risks To Long-Term Forecast: The major historic weakness of Canadian economic growth has been low productivity. Although we expect a pickup in corporate investment in the near future, without a structural improvement in business investment and key national industries, potential GDP growth could be closer to 2.0% than the 2.3-2.4% that we expect over our 10-year forecast period.
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