2018 Economic Outlook for Canada

2018 Economic Outlook for Canada

The 2018 economic outlook for Canada, according to Pierre Cléroux @PierreCleroux VP, Research and Chief Economist, BDC, is strong. The Canadian dollar will hover around $0.80 USD.

2018 Economic Outlook Video by Pierre Cléroux

Hello everyone.

Regarding the 2017 Economic Performance

  • Canada had an impressive economy growth of 3.1 percent in 2017.
  • Our economy weathered the oil price shock and is now on solid footing.
  • Export and business investments are up.
  • And the job market is thriving.

2018 Economic Outlook

What should we expect for 2018?
  • The world economy is improving as commodity prices are increasing.
  • The US economy our main trade partner is also gaining momentum.
  • All this is having a positive impact on Canada as demand for our products and services will be stronger.
  • We expect to have solid growth of over 2%.
  • In 2018 next year all Canadian provinces will have positive growth.
  • Provinces with the strong manufacturing base such as Ontario, Quebec, BC, and Manitoba will continue to benefit from our low [Canadian] dollar and the strong demand from the US.
  • On the other hand, oil producing provinces Alberta, Saskatchewan in Newfoundland Labrador will benefit from a stronger oil price.
However in all this positive outlook, there are some things to watch for.
First as the economy improves, we should see an increase in interest rates, both in Canada and the US. This will not be significant but nevertheless will increase the borrowing costs for business owners.
Second there are uncertainties related to the renegotiation of the NAFTA free trade agreement. We don’t know yet what would be the end of the NAFTA negotiation, but we believe that the US will remain an important and an interesting market for Canadian businesses.
Finally the Canadian dollar will remain around 80 cents in 2018.

What are the implications for Canadian entrepreneurs? 

  • As the world economy is growing this offers incredible opportunities for business owners.
  • There are few headwinds, but a lower dollar would continue to be an advantage for exporters.
  • Also let’s not forget that CETA, the new trade agreement we have signed with the European Union, will facilitate access to our market of half a billion people.
  • With interest rates still low, now is the right time for Canadian entrepreneurs to make the necessary investment to grow become more productive and more competitive.

Stephen Poloz: Bank of Canada governor on Canada’s economic future in 2018

00:45
that keep its governor Stephen poloz up
00:47
at night I had the chance to speak with
00:49
governor polos in an exclusive
00:51
one-on-one interview earlier today
00:53
here’s the first part of our
00:54
conversation governor welcome back to
00:58
the show
00:59
delighted nice to see everyone else has
01:01
begun this year or ended this year begin
01:03
to set us up for next year with the
01:05
economy’s doing great the markets are
01:07
going like gangbusters jobs are being
01:09
added and you come in to throw cold
01:11
water on the whole thing you you found
01:14
stuff that keeps you up at night even as
01:16
the economy is doing so well so that’s a
01:18
bit unfair as I did talked about you
01:20
talked about how well is doing we’ve had
01:22
a great year and you know since I became
01:25
governor it’s really the first really
01:26
good year and all the rest we’ve been
01:29
just playing defense right you know so
01:31
it’s been great to see things coming
01:33
together and our confidence is
01:36
increasing there are still some left
01:38
over things to do you know so we don’t
01:40
want people to forget those things and
01:42
just assume everything’s perfect cuz
01:44
it’s not how important is that part of
01:46
your job though to go and look for where
01:49
the risk is because I think we could be
01:50
blinded by it with everything that is
01:52
going so well right now well I think
01:53
it’s it’s it’s really all I think of
01:55
monetary policy it’s most people think
01:58
of it it’s kind of like an engineering
01:59
exercise when you know what the economy
02:01
is doing you just tweak like this and
02:03
everything’s perfect but in reality we
02:05
don’t know enough to be able to do that
02:07
and if you take that uncertainty into
02:10
your policymaking instead of just
02:12
assuming it
02:13
which is what the previous example does
02:15
then you start thinking about more as a
02:17
risk management exercise right so which
02:20
risk is worst that I face and how do I
02:22
protect against that which risk would
02:24
actually be good and in which case I’ll
02:26
let that go if it happens as you said
02:29
this is the first good year you’ve had
02:30
since since your tenure began has the
02:33
role changed as the economy has started
02:35
to climb back out again were you then
02:38
looking for sort of signs of good in the
02:40
economy to sort of tell us this and it’s
02:42
gonna get better in a couple quarters
02:43
down the road and now it’s shifted a
02:45
little bit you know we we went through a
02:47
phase when I first came which we ended
02:49
up calling serial disappointment Breck
02:51
as we had one step forward and then
02:53
another step back and nothing seemed to
02:55
go in a nice trend and then the oil
02:57
shock hit and of course this was at that
03:01
time we were actually getting quite
03:02
encouraged and men boom aw Christ shock
03:05
meant a two-year delay in that process
03:07
of getting back to where we belong and
03:09
so when I look at it like there’s never
03:12
really been a period that I could call
03:13
typical well you know every every period
03:15
has been unique we’re in a we’re in a
03:18
phase in history which is unique we hope
03:22
it stays unique because it’s a post
03:24
crisis economy where we still have
03:26
legacies legacy effects throughout our
03:29
economy and much even bigger ones in
03:32
other economies so nothing is as what
03:35
usually is is done you said in the
03:38
speech the economy is operating near its
03:40
capacity growth is forecast to run above
03:42
potential and yet at the same time to
03:44
remain slack in the labor market and
03:46
that that poses a downside risk to risk
03:48
inflation is that like having two
03:50
opposing thoughts in your head at the
03:51
same time and is that a big part of it
03:54
is trying to balance out where the good
03:55
is and where the bad well this is what I
03:57
mean by risk management so for us we say
04:00
you know by conventional measures the
04:02
economy is running basically at folk
04:03
full steam but we can see in the labor
04:06
market there is there’s excess capacity
04:09
there this is the sort of divergence
04:12
that happens when you have slow cycles
04:14
like we’ve had normally those things
04:16
would be perfectly correlated with each
04:17
other right and so right now they are so
04:19
what we want is the economy to grow
04:21
hotter for a while so that it uses up
04:24
that access
04:25
see that’s still in the labor market and
04:27
the way that will happen is companies
04:29
won’t invest more create new capacity
04:31
with more people and raise our level GDP
04:35
throughout okay so that’s the process
04:37
what I call a sweet spot that we’re
04:39
watching unfold now and it could last a
04:41
year or something in the US economy
04:44
well last 18 months or so always been in
04:46
that same place and I mean you mentioned
04:48
your three concerns where cyber threats
04:52
what was the other one house and and
04:54
housing prices and indebtedness and then
04:57
of course job concerns for the job
04:59
market for young people do all of those
05:01
sort of rotate around those the you know
05:03
business investment and exports and how
05:05
we as an economy are dealing with those
05:07
two core things well yeah some what some
05:10
do a cyber I think it was an independent
05:12
thing which is not really dependent on
05:15
the cycle or anything like that and but
05:18
the other two are actually longer-term
05:20
issues so they’re you know what we hope
05:22
is that those folks who are young who
05:24
have dropped out of the workforce so
05:26
they’re not counted at unemployment rate
05:28
today will return you know as the
05:31
conditions continue to improve in only
05:32
the last month we saw some signs of that
05:34
so sure so we’re encouraged by that and
05:36
you know there are like four percent of
05:38
them that were in the workforce before
05:40
and aren’t there now in terms of the
05:42
household debt thing a governor can’t
05:45
give a speech without talking about that
05:47
because that’s our number-one concern
05:48
and the fact is we’ve accumulated all
05:52
that in the post-crisis period it was a
05:55
byproduct of the monetary policy we
05:57
followed we understand all that and so
05:59
what we want to do is make sure that we
06:01
don’t do something abroad or in someone
06:03
to put a put our our future outlook in
06:05
danger
06:06
by under estimating how important that
06:08
is it’s important in two ways if
06:10
interest rates are higher today has a
06:12
different effect because of the level of
06:13
debt but secondly the the vulnerability
06:16
is there so that if there were a shock
06:18
like we had in 2008 today the effects
06:21
would be much larger on the economy
06:23
that’s a magnifying effect and so that
06:25
vulnerability becomes an actual risk if
06:27
some some some shock hits and so what we
06:30
want is the economy become more
06:32
resilient more sustainable through time
06:34
hence the changes to the mortgage rules
06:36
etc
06:36
and really quickly on on just sort of
06:38
the direction of things you’re sounding
06:40
a cautionary tone the us pushing ahead
06:42
really quickly and plans to have a
06:44
number of hikes over the next year’s I
06:46
think we’re they’re gonna be up three
06:47
point one percent at three point one
06:49
percent by 2020 can we afford to take
06:51
that cautionary stance as we see a
06:54
divergence in interest rates in the US
06:55
well it’s very important that we have an
06:57
independent monetary policy our
06:59
inflation targets are our inflation
07:00
targets missile witness that back in
07:03
2015 when the oil price shock was really
07:05
having its effecting the economy we cut
07:07
rates twice a year while the Fed raised
07:09
rates so that’s proof that we can have
07:11
an independent policy because that all
07:13
shock were a year or two behind the u.s.
07:15
in the cycle and so we have some more
07:18
time in front of us and so I think we
07:21
can have our independent policy while

07:22
the Fed goes about its business the

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