Robust economy bodes well for Canada: RBC economist

Canadians have reason to be optimistic with economic indicators pointing to continuing growth in the country’s economy this year, says Royal Bank of Canada senior vice president and chief economist Craig Wright.

He delivered this message as part of an economic outlook at an Oakville Chamber of Commerce breakfast Tuesday, which drew about 250 politicians and members of the local business community there.

Wright expects growth in Canada’s gross domestic product (GDP) to slow compared to 2017, but still see an increase of 1.9 per cent.

“Last year was a remarkable year where we saw phenomenal gains well above our speed,” he said. “Now as we go forward and we hit that speed limit, growth will tend to slow down, especially in the environment of rising interest rates.”

Wright said government spending on infrastructure and a moderate increase in business investment are expected to drive 2018 growth.

But 2018 is not devoid of risks, he added, pointing to the geopolitical uncertainty created after the leaders of the U.S. and North Korea threatened nuclear war.

In the first fiscal quarter, the Canadian dollar is expected to weaken due to factors such as the uncertainty around North American Free Trade Agreement talks.

But Wright expects the loonie to rebound and trade between 75 and 80 cents US for much of the year.

He noted 160,000 jobs were created in December and November.

“The job market in Canada has been remarkable. These are mostly full-time jobs. … The unemployment level in Canada is now the lowest it has been since 1976.”

Wright also said the housing market is cooling, but not collapsing, due to regulatory measures put in place in various provinces, along with rising interest rates and mortgage rates.

But he was critical of some of Ottawa’s fiscal policies, particularly the decision to run deficits.

While Canada’s debt and deficit ratios are not at alarming levels, he said, we are probably closer to the next recession than the last and this is the time to get Canada’s financial house in order and build reserves.

Wright also said the country’s competitiveness levels dropped in 2017, which he blamed on higher personal and corporate taxes, and on carbon pricing.

“It is important carbon pricing is gradual, predictable and revenue neutral. Revenue neutral means if there is a cost, you have to offset it somewhere else in terms of personal or corporate taxes. We have four provinces with carbon pricing initiatives, and all see it as a cash grab.”