Desjardins Group 2008 Economic Forecasts - The U.S. economic downturn should remain contained unless financial strains intensify further

    Ontario will be in a recession in the early part of the year. Québec will
    barely escape it

    LEVIS, QC, March 25 /CNW Telbec/ - The U.S. economy will see a downturn
in 2008, especially in the first half of the year. According to Desjardins
Group economists, GDP growth forecast for the United States is about 1.0% for
the year. However, the drama usually associated with the word recession must,
this time, be soft-pedalled. This recession, if it becomes official, should be
a small one, not in the least a marked economic contraction over a long
    Such are the main conclusions of Desjardins Group most recent economic
forecasts published today.
    "Nations in Europe and Asia will therefore not be spared. However, there
is no question of a recession in these regions," said François Dupuis,
Vice-President and Chief Economist at Desjardins Group. "Global economic
growth should slow to around 4% in 2008, compared with over 5% in 2007."
According to Dupuis, tightening credit conditions as a result of the liquidity
crunch are limiting growth by consumer spending and business investment in
many nations, particularly in North America, as well as Japan, the UK and in
Continental Europe.
    As for Canada's economy, it is dealing with a sharp contrast. On one
hand, domestic demand is very lively. It posted 6.9% growth in the fourth
quarter of 2007. On the other, foreign trade is seeing some very tough times,
with real exports down 8.5% in that same quarter, and imports up by 10.9%.
"With the dollar to hold close to parity and a declining U.S. economy, this
situation will persist in 2008. The battle between these two components of the
economy will result in growth of only 1.3% for 2008, half that recorded in
2007 which stood at 2.7%," added Yves St-Maurice, Director and Deputy Chief
Economist at Desjardins Group.
    According to St-Maurice, Ontario will be the province that is most
affected by the downturn in U.S. activity. "Its economy is at the mercy of the
manufacturing industry, especially the automotive sector, which is going
through a period of major restructuring. It is more dependent on international
exports than Québec is, and will not be able to avoid a drop in production in
the first two quarters of 2008. Technically, therefore, Ontario will be in a
recession in the early part of the year. Québec will barely escape it, thanks
to tax cuts and public spending on infrastructure."
    Yves St-Maurice estimates real GDP growth in Ontario and Québec will be
0.5% and 1.2% respectively in 2008, compared with 2.1% and 2.4% in 2007. The
western provinces will dominate Canadian economic activity, posting real GDP
growth from 1.7% for Manitoba to 3.0% for Alberta.
    "With the ongoing mortgage credit crisis and liquidity crunch, stock
market volatility, renewed risk aversion in the financial markets, and a
deteriorating worldwide economic climate, monetary easing will continue in
2008 almost worldwide. In the United States, the federal funds rate should
drop below the 2% mark by summer whereas, in Canada, the key rate will most
probably go below 3%," stressed François Dupuis.
    With this kind of rate spread between the United States and Canada, and
high prices for commodities, especially oil, we can expect the loonie to stay
close to parity in 2008. The average price per barrel should settle in at
about US$92/barrel in 2008, compared with US$72/barrel in 2007. The Dow Jones
and S&P 500 will record gains of less than 2% in 2008, then bounce back by 8%
in 2009. Thanks to natural resources, the S&P/TSX will do a little better,
with a 3% gain in 2008 and a 10% gain in 2009.

    The full version of Desjardins 2008 Economic Forecasts can be viewed on

    About Desjardins Group

    Desjardins Group is the largest integrated cooperative financial group in
Canada, with overall assets of $144 billion, as at December 31, 2007. It
comprises a network of caisses, credit unions and business centres in Québec
and Ontario, and some twenty subsidiary companies in life and general
insurance, securities brokerage, venture capital and asset management, many of
which are active across the country. Drawing on the expertise of its
40,000 employees and the commitment of more than 6,500 elected officers,
Desjardins offers its 5.8 million individual and corporate members and clients
a full range of financial products and services. Its physical distribution
network is complemented by leading-edge virtual access methods. To find out
more, consult

For further information:

For further information: François Dupuis, Vice-president and Chief
Economist; Yves St-Maurice, Director and Deputy Chief Economist; (514)
281-7000, ext. 2336, 1-866-866-7000, ext. 2336; Source (for journalists only):
André Chapleau, Director Information and Media Relations, Desjardins Group,
(514) 281-7229, 1-866-866-7000, ext. 7229

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