No recession here but experts split on U.S. economy’s fate
Alia McMullen
Province
TORONTO — Things are looking up for the Canadian economy following its dismal first-quarter contraction. But the country’s close trade ties with the United States will likely keep forecasts on shaky ground this year.
Economists expect Canada to skirt a recession this year as downside risks to the economy subside. However, risks to the outlook are high because economists are divided on the fate of the U.S. economy.
“The message from economists for 2009 is that the U.S. economy will either stagnate or surge back to life, which is of no use for those trying to get a handle on U.S. economic prospects,” Beata Caranci, director of economic forecasting at TD Financial Group said in a quarterly report.
She said economic forecasts varied because of the numerous shocks hitting the U.S. at once.”It is unprecedented to have a collision of an oil-price shock, a two-year decline in home prices and a credit crisis,” she said, adding the duration of credit crunch was the most uncertain factor.
Caranci said a number of supportive domestic factors — such as jobs, wages and house price growth — should help the Canadian economy expand by about one per cent in 2008 after contracting 0.2 per cent in the first quarter. But gross domestic product would likely remain below a predicted 1.4 per cent rise in the U.S.
She said Canadian growth would continue to suffer from falling exports and lower investment as a result of tighter credit conditions, while high oil prices would have a mixed impact.
“The biggest negative influence on the Canadian economy will continue to flow from the export sector, which has already contracted for three consecutive quarters.” This would not improve until the U.S. economy begins to show signs of a sustained improvement in second quarter of 2009.
© The Vancouver Province 2008
