Growth of Canadian Economy Lags Until 2015

According to the Bank of Canada’s Monetary Policy Report released this month, the Canadian economy is expected to grow by a lackluster 1.6% in 2013, 2.3% in 2014, and 2.6% in 2015, and to reach full production capacity around the end of 2015. 

The global economy, on the other hand is expected to grow by 2.8% in 2013, 3.4% in 2014, and 3.6% in 2015. The growth of the U.S. economy is expected to exceed Canada’s at 3.3% by 2015. China’s will slow moderately from its current 7.7% growth rate to 7.2% by 2015.

Canada’s stall has been in exports and business investment. There has been slower growth in household credit and higher mortgage interest rates, which is positive for household debt to disposable income imbalances.

Inflation has also remained low in Canada, but the outlook for inflation is subject to several risks: stronger growth in more advanced economies and a more difficult than expected recovery in Europe. Here in Canada, the risks are continued weakness in our exports and a quicker than expected rebound in consumer and business spending.

The Bank concludes in its report that the substantial monetary policy stimulus currently in place is appropriate, and as a result has maintained the overnight interest rate at 1%.