OTTAWA, Jan. 14 /CNW Telbec/ - The U.S.-led global recession has dragged
the Canadian economy into recession in 2009. Canada's economy is expected to
contract for three consecutive quarters, resulting in a 0.5 per cent decline
in real GDP this year, according to the Conference Board's Canadian Outlook -
"The deepening U.S. recession continues to hurt Canada's trade sector.
The new and perhaps more significant factor dragging the Canadian economy into
recession is the impact that much lower commodity prices are having on real
income. Lower resource prices, combined with waning consumer and investor
confidence and the bleak U.S. outlook, will bring a recession to Canada in
2009," said Pedro Antunes, Director, National and Provincial Forecast.
The economy will not avoid a recession despite the Conference Board's
assumption of federal fiscal stimulus in the form of tax rebates and increased
funds for infrastructure. Canadian business investment and employment will
decline this year. The contraction will temporarily reverse Canada's 14-year
trend of tightening labour markets, boosting the unemployment rate to above 8
per cent by the end of 2009. With raw material prices not expected to rebound
quickly to 2008 levels, both federal and provincial governments slip into
significant fiscal deficits and will be hard-pressed to balance their budgets
by the end of the forecast period in 2013.
The U.S. economy, meanwhile, is currently experiencing its greatest
contraction since the 1930s. In its U.S. Outlook - Winter 2009, the Conference
Board expects real GDP in the United States to contract by 1.7 per cent in
2009, even with a massive fiscal stimulus package.
"Almost every region, industry, occupation and demographic group in the
United States is being affected by the current downturn," said Kip Beckman,
Principal Research Associate. "American household spending, which has been a
pillar of global demand in recent years, is forecast to drop by 4 per cent in
As analyzed in depth in the forecast, the Obama Administration's stimulus
package is expected to have a positive effect on the U.S. economy, helping to
prevent an extended recession. A rebound in growth is expected in the second
half of 2010, due to the aggressive monetary policy response by the Federal
Reserve and fiscal action by the U.S. government. U.S. real GDP is forecast to
expand by 2.2 per cent in 2010.
As key U.S. export markets recover, Canada's real GDP is forecast to
rebound to growth of 3.6 per cent in 2010.
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