Invest in Canada

A rosy forecast: Possible, if it all goes right

by investor on 24/01/09 at 12:44 am

For months, the global downturn has been compared to the worst economic slumps of the past century: Japan’s lost decade, the drawn-out recession of 1982 and even the Great Depression.

Now, with a forecast for 2010 that sees Canada’s economy growing at a blistering, almost 5-per-cent clip for much of year and averaging a healthy 3.8 per cent for the year, Bank of Canada Governor Mark Carney is calling into question the widely accepted view that recovery will take many quarters of sluggish growth.

Mr. Carney’s forecast for a dramatic economic rebound in Canada next year contrasts with the consensus of private sector economists of 2.3-per-cent growth that year and has prompted incredulity among observers.

But that doesn’t mean the central bank is wrong, economists said. Rather, it likely means the bank assumes that everything will go right for Canada in the coming year.

The forecast hinges on federal and provincial spending, stimulus packages around the world driving up commodity prices, and credit conditions easing. In addition, the U.S. economy would need to bottom out and start to pick up so that demand for Canadian goods such as cars and lumber improves.

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