Sluggish times ahead for Canada

Sonya Khanna

Business Editor

Bank of Canada governor Mark Carney has decided to maintain the benchmark interest rate at one per cent, reflecting a weaker economic outlook in Canada as well as a bleak global economic environment.

The reason for this decision was cited to be a result of low target interest rates as well as “considerable monetary policy stimulus” evident in Canada, according to Carney. With the Canadian financial system functioning well, the Bank of Canada has said they will continue to keep close watch on the economic and financial developments in Canada and the global economy.

Financial market volatility has shown significant increase since July and risk-taking has diminished across global markets with waning consumer and business confidence. Growth in fiscal austerity, coupled with continuing deleveraging viagra super active online by households and banks, has further contributed to the weakened outlook looming in Canada.

The Bank of Canada indicates that the Canadian economy is expected to remain slow through mid-2012 before gaining economic momentum amid dwindling uncertainty and growing confidence.

“Domestic demand is expected to remain the principal driver of growth over the projection horizon,” reads a media release from the Bank. “Household expenditures are now projected to grow relatively modestly as lower commodity prices and heightened volatility in financial markets weigh on the incomes, wealth and confidence of Canadian households.”

Business fixed investment is projected to grow steadily due to low borrowing costs as well as a higher currency value, enabling business to invest easily in state-of-the-art machinery and equipment.

Net exports are expected to remain a “source of weakness” amid low foreign demand and ongoing strength of the Canadian dollar.

Following statements from Mr. Carney regarding the current economic outlook, Canada’s Minister of Finance Jim Flaherty released an update Tuesday expanding on economic growth expectations from leading private sector forecasters.

“As we all know, although our domestic economy remains strong, global economic growth has weakened in recent months, and this will affect us here in Canada,” said Flaherty in the release. “The private sector forecasters I met with today believe that recent global economic headwinds will continue to limit growth in Canada through 2012.”

The central bank anticipates faster growth in 2013 than previously noted at the time of its July forecast, though policy makers say it will take some time to inch back to full capacity. Inflation will slow more than previously anticipated, declining through 2012 before reverting back to 2 per cent by the end of 2013.

The central bank forecasted an increase in economic growth in Canada to 2.1 per cent in 2011, while the 2012 forecast was cut 1.9 per cent. Policy makers have predicted an optimistic growth of 2.9 per cent in 2013.