After a turbulent year, Canada’s economy is set to grow by 2.5% in 2012, according to the latest economic outlook issued yesterday by RBC Economics.
Commodity prices remain at historically high levels, the US is projected to continue to grow and the Bank of Canada is keeping monetary policy accommodative – all of which will support growth in Canada. But the forecast includes the key assumption that European policymakers contain the sovereign debt crisis in that region.
“Canada’s economy experienced some large swings in growth in 2011. The second quarter’s unexpected contraction was a response to a number of temporary factors – the natural disasters in Japan, reduced auto industry activity and wildfires in Alberta. As these factors reversed, a strong rebound followed in the third quarter,” said Craig Wright, Senior VP and Chief Economist, RBC. “While the initial release of second quarter data prompted some talk of a double-dip recession, third quarter data proved otherwise.”
The Bank of Canada has held interest rates at low levels in the face of heightened uncertainty about the global economy, moderate growth in Canada and expectations that inflation will remain steady. Recently, the Bank of Canada reaffirmed its 2% inflation target for the next five years and signalled its continued commitment to flexible policy making.
Click here for more details from RBC.