Canada Sees Improved Economic Forecast
First Published: ADawnJournal.com February 15, 2010
While places like the United States are struggling to cope with the impact of the recession, the Canadian economy seems to be rising above the recession and moving back into the black. This is in no small part to the housing market in places like Vancouver and Toronto, which have seen record rebounds after hitting all-time lows in early-2009. As a result, Jim Flaherty, the Finance Minister of Canada, has revised the economic forecast of the country upward.
Ottawa revised its growth estimate from 2.3 percent for 2010 to 2.6 percent. That .3 percent may not seem like much, but it accounts for millions upon millions of dollars in the Canadian economy and any growth is good growth in these tough economic times. The government has also forecasted that the growth will reach 3.2 percent in 2011, before falling over the next three years to 2.6 percent by 2014.
Of course, this is all just speculation and there is no way to completely know how the economy is going to do. During the 2008 Federal Election, Prime Minister Stephen Harper stated there would be no deficit for the government if they were elected, but come March the country was running in a deficit. It is impossible to predict how the economy will do; all that can be done is to speculate.
Currently, the Canadian debt-to-GDP ratio is about 30 percent, which is the lowest in the G-7 countries, and about half of the level in the U.S. and U.K. Unemployment rate of the country is a full 1.5 percent lower than what is seen in the United States right now.
All things considered given the potential growth, the government is not stating when Canada will have a balanced budget as there are still sectors in the country struggling and the largest trading partner of the country is still running in a recession. For the next two to three years, there is really no way to know when there will be a balanced budget, even if the economy continues to grow at over two percent per year.
It is estimated that by 2015, the government’s budget should be balanced, but again there really is no way to know for certain.
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Speaking of the housing market, across the country there were major gains in January, including in Toronto where the highest-ever gains for the month of January were seen. Toronto and Vancouver, along with other places like Calgary, are bringing the housing market out of its pit falls and the surging market sales are expected to continue until June of this year. It is at this point that the Bank of Canada will increase the record low interest rate, which currently sits at .25 percent. Once this happens, the housing market will slow and many are worried that the country will go through another housing bubble as those who got mortgages when they were cheap can no longer afford them. This is just another reason why it is so hard to predict how the economy will do. Enough people not being able to pay their mortgages – thanks(!) to a higher interest rate could send everything back into a tail spin.