The Telegram (St. John's)

Canada to skirt global turbulence, record healthy growth this year: RBC

- BY JULIAN BELTRAME

Canada’s recovery is getting a vote of confidence from economists at the Royal Bank, who in a new report judge the economy sufficient­ly resilient to withstand turbulence from abroad.

The RBC’s new quarterly forecast anticipate­s the economy will rebound to 3.1 per cent growth this quarter, which ends in June, and record a 2.6 per cent gain in gross domestic product overall for both 2012 and 2013.

But fresh data from the Conference Board suggests headwinds from abroad are already affecting Canada’s corporate sector.

The board’s May index on industry profitabil­ity found 13 of 49 industries reporting a decline in profitabil­ity and several that had been posting strong increases at the beginning of the year now showing a slowdown.

“The weaker profitabil­ity outlook is linked to the ongoing European debt crisis,” the think-tank said, also citing slowing growth in emerging markets and depressed prices in the commoditie­s that Canada sells to the world.

The RBC economists acknowledg­ed the external difficulti­es and have incorporat­ed a slower 3.5 per cent global growth profile for this year. But they are buoyed by Canada’s strong fundamenta­ls and believe policy-makers will be successful in preventing a European financial meltdown.

“We’re relatively bullish,” said Craig Wright, RBC’s chief economist. “On balance, conditions for growth are positive, supported by a continuati­on of a low interest rate environmen­t and a Canadian financial sector that is healthy and ready to provide credit.”

Wright said the recent bad news has dampened confidence, but has not changed the overall outlook.

“It’s still basically a risk story,” he said of Europe. “In a sense it’s more of the same: we get dragged to the edge of the cliff and then get dragged back.”

The other risks the bank says must be averted are the possibilit­y of a harder-than-expected landing for China, and the danger that political gridlock in the U.S. will prevent a compromise to extend stimulativ­e fiscal measures beyond this year.

The RBC’s view of the economy is at the upper limit of private sector economists’ range, as well as being above the Bank of Canada’s 2.4 per cent growth expectatio­n for both years.

Last week, the central bank signalled it may downgrade its own forecast in the future. In a statement, it noted that “global economic growth has weakened,” citing European debt problems and weaker than expected performanc­es in emerging markets and the U.S.

Newspapers in English

Newspapers from Canada