OTTAWA: The Canadian economy is showing strength in employment, housing starts and a rebound in energy investment according to the latest Reserve Bank of Canada Economic Outlook report. RBC Economics expects real gross domestic product to grow by 2% in 2017, followed by a slightly firmer 2.1% in 2018. Consumers will continue to support growth in 2017, according to the latest RBC Economic Outlook report. Canadian exports are projected to accelerate slightly following a subpar performance in 2016, Newswire.ca reported.
“Economic conditions, including a pickup in US business investment and modest US export growth, are likely to bolster Canadian exports, but the threat of protectionist trade policies has the potential to hurt Canada’s small, open economy,” said Craig Wright, senior vice-president and chief economist at RBC. Federal government spending on infrastructure projects will provide more significant support in 2017 and this activity is expected to add almost half a percentage point to the national growth rate. At the same time, a slowdown in real estate activity is likely to weigh down growth, as lack of affordability and legislative changes cool some overheated urban housing markets.
While a steady, modest increase in energy prices is positive for the Canadian dollar, a more significant factor in 2017 will be the interest rate differential between Canada and the United States. The US dollar is likely to appreciate against most major currencies as the Federal Reserve raises rates through the year. RBC forecasts the Canadian dollar will end 2017 lower at 72.5 US cents, after trading around 76 US cents in the first two months of the year. The Canadian dollar is projected to reverse most of this depreciation in 2018 rising to 75.2 US cents by the end of 2018.
