LÉVIS, QC, Dec. 17 /CNW Telbec/ - The global economic recovery is now a fact. Even though some structural problems persist and some countries are still lagging behind, a few of them will no doubt return to pre-recession production levels in 2010. The next economic expansion phase could then emerge as of 2011. This is the essence of the economic and financial forecasts for 2010, released today by the Economic Studies department of Desjardins Group (www.desjardins.com/en/a_propos/etudes_economiques/previsions/financieres_trimestrielles/).
"After undergoing periods of extreme turbulence, financial markets will regain stability and will increasingly be able to base their fluctuations on fundamentals, without being constantly upset by unusual events," stated François Dupuis, Desjardins Group Vice-President and Chief Economist.
Canada and the United States leading the major industrialized countries
After sliding 1.2% in 2009, the global real GDP will expand by 3.4% in 2010, maintaining a similar pace - 3.8% - in 2011. Dominated by China and India, developing nations will continue to act as drivers, with growth rates greater than 5% over the next two years. Compared to that, the performances of the industrialized countries, which will record real GDP increases of 1.8% in 2010 and 2.0% in 2011, seem tepid. The United States and Canada will lead the way, posting growth of more than 2% for the next two years; the euro zone, Japan and United Kingdom will not manage to match this pace," emphasizes Yves St-Maurice, Director and Deputy Chief Economist at Desjardins Group.
The recovery plans have had beneficial impacts on the economy. And we can certainly give them credit for keeping the worst-case scenario at bay. Still, the private sector, weakened by these last few years of economic crisis, remains shaky. This will impel governments to spend lots more money in 2010 to put it back on course. Things will turn around in 2011 and the private sector will abandon its crutches and stand on its own two feet. Everything suggests that Canada and the United States will get their real GDPs back to pre-recession levels at the end of 2010. "The year 2011 will then see the start of another expansion phase, tempered by governments' slow withdrawal from the economy," added St-Maurice.
Loonie to reach parity soon
Low interest rates and the renewed wealth effect due to the comeback by commodity prices will continue to boost Canada's economy. After a forecast decline of 2.6% in 2009, Canada's real GDP should grow by 2.1% in 2010 and 3.0% in 2011. The improvement will mainly stem from the western provinces while Ontario and Québec will record growth that is below the national average for the next two years.
The impact of the gradual comeback by oil prices in tandem with the world economy's recovery will push the loonie up to parity with the greenback in the summer of 2010. Manufacturing exports, mainly focused in central and eastern Canada, will then be hurt by the Canadian dollar's appreciation. Québec's economy is on the right track with a healthy real estate market, recovering consumer spending and job losses that are moderate, all in all, preventing overly extensive deterioration in households' financial situations. The real GDP should rise by 1.8% in 2010 and 2.5% in 2011. A turnaround in the automotive industry will be crucial to the development of Ontario's economy in the next few quarters. The forecast growth for Ontario is 1.9% for 2010 and 2.8% for 2011.
Key rate increases postponed
The soft global economy and commodity prices translated into a widespread drop by inflation in 2009. In Canada, the annual change in the consumer price index that excludes eight volatile components could close in on 1% in the second half of 2010, while trend inflation in the United States could drop below this level. As a result, "the first interest rate increase is not expected before fall 2010 in Canada and, in the United States, it might not happen until the beginning of 2011," declared Dupuis.
"As for the stock markets, they will maintain their momentum for the next two years," said Dupuis. Economic growth will improve the profit outlook and investors will want to take more risks in one portion of their portfolio. Weaker than in 2009, stock market growth will still not be negligible for the next two years. The S&P 500 should post increases of 13.6% in 2010 and 8.0% in 2011. For the S&P/TSX, its respective increases will be 11.3% and 9.4%.
About Desjardins Group
Desjardins Group is the largest cooperative financial group in Canada, and the sixth largest in the world, with overall assets of $163 billion. Drawing on the strength of its caisse network in Québec and Ontario, as well as its subsidiaries, several of which are active throughout Canada, Desjardins offers a full range of financial products and services to its 5.8 million individual and business members and clients. Desjardins Group is also home to a wealth of expertise in property and casualty insurance, life and health insurance, wealth management, services for businesses of all sizes, securities brokerage, venture capital, asset management and secure leading-edge virtual access methods, all part of an integrated offer that is the only one of its kind in Canada. One of the largest employers in the country, Desjardins is backed by the knowledge and skills of its 42,000 employees and the commitment of its 6,300 elected officers. To find out more, consult www.desjardins.com.
SOURCE Desjardins Group
For further information: For further information: (for journalists only): Caroline Phémius, Advisor, Media Relations, Desjardins Group, (514) 281-7000, 1-866-866-7000, ext. 7646; François Dupuis, Vice-president and Chief Economist, (514) 281-7000, ext. 7322, 1-866-866-7000, ext. 7322; Yves St-Maurice, Director and Deputy Chief Economist, (514) 281-7000, ext. 7009, 1-866-866-7000, ext. 7009