In line with overall lower growth rates in 2019, which can be mainly attributed to the US-China trade war, also Canada’s numbers came down to about 1,5%, which is slightly below its usual potential. The outlook for this year is somewhat better due to growth in the real estate market, residential investments and household consumption, albeit limited by global uncertainty, trade tensions and US elections. Overall, a growth rate of about 1,7% should be achievable.
The main risks for the Canadian economy are the global uncertainties, the trade tensions and challenges in the oil sector. A slowdown in the Chinese economy would further push down commodity prices. Canadian exports remained stable despite slower global growth but would be negatively affected by a slowdown of the US economy, to which nearly ¾ of the exports are being shipped.
Households continue to be a stable factor. The negative effects of rising interest rates and the introduction of stress tests for financing two years ago seem now to be absorbed and with strong labour markets and relative low unemployment rates, wages are being pushed upwards which should translate into stronger consumer spending going forward.
Key interest rates should remain stable around 1,75% by the Bank of Canada (BoC). Contrary to the expected rise decrease measures of other central Banks the BoC could restrain from further rate cuts in order not to worsen the situations of various households.