Wednesday, October 21, 2015

Bank of Canada Lowers GDP Growth Projections for Canada for 2016 and 2017

So the Bank of Canada announced today that interest rates would stay the same, which wasn't that much of a surprise. Perhaps more surprisingly, the BoC cut their GDP growth projections for 2016 and 2017. The GDP growth was cut to 2.0% from 2.3% in 2016 and 2.5% from 2.6% in 2017. The 2015 number remained at 1.1%.

I'm not particularly surprised, considering that I don't think that the Ontario economy in its present condition with low productivity growth can grow much past 2% a year. The current Ontario budget predicts growth of 2.7% in 2015, which will be impossible to meet now, with negative growth in the first quarter for Ontario and 1.1% GDP now predicted for the entire country. Job growth in Ontario in 2015 has also been almost non-existent. The budget also predicts GDP growth of 2.6% in 2016, which considering the large part of the economy Ontario makes up of the whole country and growth for the whole country is predicted at 2.0%, seems unlikely. That will have knock on effects on the Ontario budget revenues.

Ontario should be releasing second quarter numbers for GDP soon, which should be interesting.

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