The Canadian economy has been through a bit of a rough ride over the past year, but 2016 will likely see the country return to growth, according to TD Economics’ Quarterly Economic Forecast released March 23.
Real GDP is forecast to grow 1.9% in 2016 and 2.0% in 2017. This is the first time TD has increased its growth forecast in a year, but the fact that increases in 2016 will be below 2% is a “reminder that times have changed,” TD said in its report.
“Canada’s economy is going through a structural realignment, precipitated by low commodity prices,” the report states.
“When taken together with an aging workforce and only modest expected productivity growth, Canadians will need to recalibrate their expectations to the notion that expansions of 2.5-3% are a thing of the past.”
Canadian economic growth will be divergent across the regions of the country, TD said.
“B.C., Quebec and Ontario are all expected to maintain robust growth over the coming quarters, in part reflecting the benefits stemming from export-oriented manufacturing,” the financial institution said.
“In contrast, Alberta and other commodity-exposed regions are likely to continue struggling, with Alberta’s economy expected to experience another contraction this year.”
Canada’s unemployment rate is expected to increase from 6.9% in 2015 to 7.4% and 7.3% in 2016 and 2017, respectively.
The regional differences will also be reflected across the country in the job market; British Columbia’s unemployment rate in 2016 is expected to be five ticks lower than the national average, at 6.8%. This is up from 6.2% in 2015. The rate is forecast to drop slightly in 2017 to 6.6%.
Alberta will see its unemployment rate jump from 6% in 2015 to 8.2% in 2016. This is forecast to settle down at 7.8% in 2017.
“The movements are capturing a sharp deterioration in the oil-producing provinces, as oil-consuming regions in B.C., Central Canada and Atlantic Canada have recorded stable-to-slightly declining jobless rates,” the report states.
“In Alberta, a 2.5 percentage point jump in the unemployment rate over the past year has pushed it above the national rate for the first time in three decades.”
TD Economics expects the Bank of Canada to remain on the sidelines over the next two years in terms of any changes to the overnight rate.
Globally, low commodity prices and a slowing Chinese economy will constrain growth, and these are not the only factors to consider looking forward.
“Risks to the outlook [globally] are concentrated in emerging markets,” TD said in the report. “Although fears of a global recession are diminishing, further bouts of elevated financial market volatility are a likely bet, consistent with the modest improvement in global growth projected over the 2016-17 forecast horizon.”
Overall, global growth is forecast at 3.1% in 2016 and 3.4% in 2017.
The economic outlook for the United States has not changed much, TD said, with forecasts of 2% growth in 2016 and 2.3% in 2017.