After a “tepid” 1.8% GDP growth for 2013, the Canadian economy is forecast to grow by nearly 2.5% each year during 2014 and 2015, according to “Canadian Outlook-Autumn 2013”, issued by the Conference Board of Canada.
The report says that while risks to the world economy are still high, the Canadian economy, driven by an acceleration in export volumes will have greater GDP growth over the next two years than in 2012 and 2013.
The federal government and all the provinces except for Saskatchewan ran up a fiscal deficit in 2012.
In October the federal government said its 2012-2013 deficit totaled $18.9 billion, which was seven billion less than its target.
However, with lower inflation meaning the federal government will have lower-than-forecast revenues over the next couple of years, “balancing the books in 2015-2016 will remain a challenge.”
The Conference Board says the Canadian federal government will have scarce revenue cushion to meet its balanced budget target, and will have to hold back on government spending.
Pedro Antunes, Director, National and Provincial Forecast, The Conference Board of Canada, said:
“The federal government is essentially a year ahead of its deficit-reduction schedule. Although the government is well on its way to balancing its books, it will have to keep a tight rein on spending if it is to arrive at a balanced budget on schedule.”
The Canadian economy saw strong exports at the beginning of 2013, which weakened as the year progressed. Overall export growth for 2013 is forecast to be a very moderate 1.4%.
As outlooks for the US and global economies improve, economists predict better times ahead for the Canadian economy. Exports are expected to increase by 3.7% next year and 4% in 2015.
Improving consumer and business confidence combined with low interest rates should “keep the domestic economy humming along in 2014 and 2015.”
European economic situation a risk for Canadian economy
The Conference Board of Canada added that Europe’s tenuous economic situation poses a “significant” risk to the Canadian economy regarding its short-term performance.
Conference Board economists believe the European and global economies will depend heavily on strong US economic growth over the next two years. Washington’s unclear budget policy combined with a lack of investment spending in the American business sector have undermined US growth.