The mounting global economic uncertainty won’t plunge Canada and the United States into a recession, provided policy-makers make the right moves to avoid disaster, a new outlook from the Conference Board of Canada says.
The fall report from the Ottawa-based business-oriented research group comes with the big caveat that European and U.S. leaders will have to act to stave off another financial calamity.
Conference Board growth forecasts for Canada’s 2011 GDP:
October 2009: 3.6%September 2010: 2.9%October 2010: 2.5%March 2011: 2.4%October 2011: 2.1%
"All bets are off if we have another financial crisis. It's very scary right now," said economist Pedro Antunes, who wrote the report.
He said he is still hopeful European leaders will find the resolve to backstop banks exposed to Greece and debt from other Mediterranean countries, thereby preventing the problems from spreading around the world as happened in the fall of 2008 with the failure of U.S.-based Lehman Brothers.
European leaders, however, appear to still be at odds on how to proceed entering into their key meetings this weekend on the crisis.
The Conference Board’s latest GDP growth estimate for Canada represents another in a series of steadily drooping forecasts.
The Conference Board said Canada's economy, which is slowing down to 2.1 per cent growth this year, will pick up some steam next year and advance by 2.4 per cent before accelerating to 3.3 per cent growth in 2013. By that time, Canada's unemployment may reach as low as 6.3 per cent, the group's economists say, a level not seen since early 2008, before the onset of the global recession.
Earlier this year, a Conference Board of Canada report saw 2.4 per cent economic growth for 2011. That was down from the 2.9 per cent the group forecast last fall and a 3.6 per cent estimate two years ago.
Conference Board predictions often miss the mark. The organization forecast Canada would see three quarters of economic contraction in 2009; there were only two. It also said two years ago that the Bank of Canada’s target overnight lending rate would be four per cent by 2011; the rate has been at one per cent since September 2010.
The board's call for next year is about half a point stronger than expectations from some of Canada's banks, particularly Scotiabank and the Bank of Montreal. The Bank of Canada will reveal its forecast next week.
Meanwhile, the economy in the United States, which ground to a halt over the summer, is likely to rebound to levels similar to its northern neighbour, the Conference Board foresees.