The Canadian economy will experience slightly better growth this year than last, the Conference Board of Canada predicted in a surprisingly optimistic forecast Monday.

The country should see its real GDP grow by 2.8 per cent in 2008, the board said in its quarterly economic forecast. That's higher than most private sector economists are calling for.

For instance, the chief economists at the big five banks are calling for the economy to grow by anywhere from 1.9 per cent to 2.6 per cent this year. The federal Finance Department has lowered its 2008 growth assumption to a range of two per cent to 2.2 per cent.

"As long as the United States averts a recession, Canada's domestic economy will remain largely impervious to woes afflicting our largest trading partner," said Pedro Antunes, the director of the Conference Board's national and provincial forecasts.

The board's optimistic outlook is based on its view that domestic spending will continue to be robust this year — with domestic demand forecast to grow by 3.4 per cent. It notes that job growth and wage gains remain strong.

It says the $15 billion in new fiscal stimulus for 2008 announced in the federal government's economic statement in October will support household spending and investment this year, keeping the momentum going.

The forecast sees expensive oil leading to a boost in energy investment, despite Alberta's new royalty regime. Inflation, it says, will drop to just 1.3 per cent because of a high Canadian dollar and the Jan. 1 drop in the GST.   

The lack of inflation and the strong domestic economy will keep interest rates unchanged until early 2009 — another major difference from most other forecasts. Many private sector economists are expecting at least one quarter-percentage-point cut — and perhaps two — from the Bank of Canada this winter.

The Conference Board says Canadian exporters will continue to face weak demand from their U.S. customers because of the high loonie.

U.S. household spending in the first half of the year will be "very weak," but the board says the U.S. economy should still manage to avoid a recession. On that point, the board agrees with the consensus of the bank economists.