Canada to avoid recession: Conference Board of Canada

The struggling U.S. economy will limit Canada’s economic growth to 0.8 per cent in 2008, but Canada will avoid a recession, according to the Conference Board’s Canadian Outlook Autumn 2008.

“To understand Canada’s outlook, we need to separate the extraordinary current financial turmoil from the impact on the real economy,” said the board’s senior vice president and chief economist Glen Hodgson. “Living beside a troubled neighbour is taking its toll. Massive declines in the trade sector have shredded Canada’s economic growth, and raw material prices have fallen off their peak levels. Still, the domestic economy has enough momentum to keep Canada out of a recession.”

In 2008, domestic demand remains a pillar of economic growth, and the income effect from resources prices still carries plenty of momentum, the board said.

However, the U.S. housing crash and ensuing financial market crisis is affecting investor and consumer confidence and tightening credit conditions. Slower economic growth, in turn, will take the shine off commodity prices.

Real net exports are expected to fall by $34 billion in 2008, an amount equivalent to 2.5 per cent of real GDP. Canadian auto experts are forecast to fall by 19 per cent this year, with Ontario bearing the brunt of the losses.