Canada Economic Forecast
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After undergoing a period of economic recession in the aftermath of the 2008 global financial crisis, Canada’s economy has bounced back to become one of the strongest performing economies among the G-7 nations. In 2010, Canada’s GDP growth (constant prices, national currency) stood at 3.071 percent – the highest it had been since 2004.
After undergoing a period of economic recession in the aftermath of the 2008 global financial crisis, Canada’s economy has bounced back to become one of the strongest performing economies among the G-7 nations. In 2010, Canada’s GDP growth (constant prices, national currency) stood at 3.071 percent – the highest it had been since 2004.
This turnaround has been largely attributed to a rebound in consumer spending, residential investment and government expenditure. However, most of Canada’s growth came in the first quarter of the year where real GDP grew by 5.6 percent. Subsequently, second and third quarter growth expanded by 2.3 percent and 1.0 percent respectively.
Nevertheless, this was still an improvement from 2008 and 2009. In 2008, Canada’s GDP growth (constant prices, national currency) slowed to 0.518 percent, the lowest it had been since 1992. Canada’s economy entered into a recession in 2009, with negative GDP growth (constant prices, national currency) of -2.462 percent.
In 2011, Canada’s economy is likely to see modest growth on the back of similar growth patterns from the second half of 2010. According to the Canadian Chamber of Commerce, “economic activity in 2011 will be tempered as federal and provincial governments curtail fiscal stimulus and then step up their efforts to restrain spending.” Much of Canada’s economic growth will thus rely on domestic demand as well as the fortunes of its neighbour and principal export market, the US.
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Canada’s GDP Forecast
Canada is the 9th largest economy in the world based on GDP (current prices, US dollars) and the 14th largest based on GDP (PPP). In 2010, Canada’s GDP (PPP) was US$1.330 trillion. Significantly, this was 4.05 percent higher than it was in 2009, where GDP (PPP) had fallen by 1.57 percent compared to the previous year. From 2011 to 2016, Canada’s GDP (PPP) is expected to increase annually by 3.66 to 4.04 percent before reaching US$1.665 trillion. This will make Canada the 13th largest economy in the world according to GDP (PPP).
Similarly, Canada’s GDP (PPP) per capita is also expected to grow by a slow but consistent rate from 2011 to 2016. In 2009, Canada’s GDP (PPP) per capita fell by 2.75 percent to US$37,970.90. The subsequent recovery in 2010 followed by annual growth between 2.20 to 2.71 percent means that Canada’s GDP (PPP) per capita will hit US$45,108.04 by the end of 2016.
Canada’s Unemployment Forecast
Despite strong economic growth in the first half of 2010, the pace of job creation slowed considerably in the second half of the year. In the first six months of 2010, employment growth averaged 51,400 per month. On the other hand, the July to November period only saw employment gains averaging 7,620 per month.
As such, unemployment rates have remained relatively high in spite of the economic recovery. In 2010, the unemployment rate in Canada was 7.992 percent. Although this was an improvement from 2009’s unemployment rate of 8.292 percent, it is considerably higher than pre-financial crisis levels where unemployment rates in 2007 for example was 6.058 percent.
Canada’s unemployment rate is expected to gradually improve and return to pre-financial crisis levels by 2015. From 2015 to 2016, the unemployment rate is expected to remain consistent at 6.1 percent.
Canada’s Inflation Rate & Current Account Balance Forecast
Since 1992, Canada’s inflation rate has never gone above 2.75 percent. Apart from abnormalities in 1994, 1998 and 2009, where inflation dropped below 1 percent, the inflation rate in Canada has remained fairly consistent and well anchored within the Bank of Canada’s operational target of 1 to 3 percent. According to the Canadian Chamber of Commerce, a strong currency, relatively high unemployment, modest salary gains and a significant output gap will continue to help withstand any inflation pressures in the future.
In 2011, Canada’s inflation rate (average consumer price change) is expected to be at 2.231 percent. From 2012 to 2016, the inflation rate is expected to hover between 1.9 percent and 2.03 percent.
From 1999 to 2008, Canada possessed a current account balance surplus. However, in the advent of the financial crisis, Canada now has the 7th largest current account balance deficit in the world behind the US, Spain, Italy, France, Brazil and the UK. In 2008, Canada’s current account balance stood at US$6.483 billion. However, by the end of 2009 this figure changed to become negative US$38.075 billion. In 2010, the deficit increased further to negative US$48.515 billion. Canada’s current account balance deficit is expected to increase marginally to negative US$49.056 billion by the end of 2011, before gradually decreasing in the next few years. By the end of 2016, Canada’s current account balance deficit will fall to negative US$26.871 billion
