Decline in growth predicted for Canada
Look for economic pick-up in 2008, Paris-based think-tank suggests
Reuters News Agency
PARIS — Canada’s economic growth is expected to slow marginally next year, and overall inflation should decelerate, the Organization for Economic Co-operation and Development says.
“The economy is expected to grow at below-potential rates in the near term,” the Paris-based group said yesterday in a twice-yearly economic outlook.
“Domestic demand has been firm, but there are signs of cooling.
“But the slowdown is likely to be short-lived with the economy subsequently growing at a reasonably solid pace.
“A recovery of export demand should be one of the main drivers of the rebound, especially as external markets accelerate and the effects of past currency appreciation dissipate.”
The Paris-based think-tank expects Canadian gross domestic product to expand 2.8% this year and 2.7% next year, rebounding to 3.1% in 2008.
Overall price increases are expected to decelerate next year as the decline in energy prices takes effect.
Still, underlying inflation is expected to inch up, albeit within comfortable ranges for the Bank of Canada.
Consumer price inflation is expected to slow to 1.5% next year from 2.1% this year, then pick up to 2.0% in 2008.
Core inflation, excluding volatile food and energy prices, should pick up to 2.1% next year from 1.9% this year, before easing slightly to 2.0% in 2008.
Against this backdrop, and barring any surprise shocks, the Bank of Canada should look to keep interest rates on hold at 4.25% over the next two years, the group said.
The main risk for Canada is if the recent slowdown in the country’s biggest trading partner, the United States, lasts longer than expected.
