Canada’s real GDP is forecast to expand by 1.8 per cent in 2020 and 1.9 per cent in 2021, underpinned by strong labour markets and modest growth in consumer spending, The Conference Board of Canada said.
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This, along with better prospects in the energy sector, will keep Canada’s economy out of recession.
2020 will see economic concerns carry-over from 2019.
Uncertainty on the global trade front, tepid global economic growth, and disappointing non-resource business investment in Canada will persist.
Slowing global growth will challenge Canada’s trade sector especially with the U.S., Canada’s biggest export market.
A weaker U.S. economic outlook does not bode well for Canadian exports, particularly for non-energy sectors that rely heavily on global demand.
As a result, non-energy exports are expected to expand by a modest 1.2 per cent in 2020 and 1.9 per cent in 2021.
The closure of GM’s motor vehicle assembly plant in Oshawa on December 20, 2019 will be felt, as vehicles and parts are Canada’s largest non-energy export sector.
Non-resource business investment continues to disappoint.
From 2014 to 2018, real non-resource investment shrank by $2.7 billion, with a further decline of 0.1 per cent estimated for 2019.
Although growth is projected to return in 2020, it will not be enough to turn the tide.
The value of capital stock per worker has now fallen for four straight years and is set to fall again in 2020.
Many factors are having a positive impact on the Canadian economy right now.
Labour market conditions remain tight, and that is pushing up wages.
Better income growth is leading to a more upbeat outlook for consumer spending.
A recovery in resale housing markets and a long-awaited rebound in energy sector investment is also occurring.
An extraordinary 400,000 new jobs since the beginning of the year has led to two important side effects—a boost in the labour force participation rate, and accelerating wage growth (as firms pay more to compete for workers).
Housing starts increased in 2019, and Canada’s average resale price rose 5.4 per cent in the third quarter.
The momentum will persist in 2020, resulting in a nearly 8 per cent annual gain.
But slower 3.2 per cent price growth is call for 2021. ■