Oil, agriculture to buoy economy in West
Economically speaking, Western Canada should still be one of the best places in the world to live in 2012, a banking expert says.
Larry Pollock, CEO of the Canadian Western Bank, expects the western provinces to surpass Canada’s forecast growth rate for next year.
The national economy is expected to expand by 1.7 per cent, “which is not much, but it isn’t a recession either,” said Pollock, before speaking Wednesday at the Red Deer Chamber of Commerce luncheon.
While Canada is anticipated to do better than most of the world, the Western Canadian economy will be in an even better position. “I think the western growth rate will be more like 2.3 or even 3.3 per cent,” added Pollock. The reason is continued oil exploration and strong oil prices.
Agricultural prices are also strengthening — especially since a resource market was created for ethanol. Pollock believes putting an organically created alcohol into gas tanks isn’t the best use of a food source — “It could be a lot of short-term thinking” — but it has caused corn prices to double.
Canadian banks, with their conservative lending practices, continue to be profitable, which is another sign that Canada is in better economic shape than many other countries.
Pollock acknowledged that Canadians tend to view high bank profits unfavourably, yet at the same time, depend on the solidity of the banking sector. “People depend on them like nothing else,” he said, noting about 30 per cent of pension vested interest funds are tied to banks.
Canadian financial institutions are in good shape, in part, because they are tied to the U.S., rather than the European Union, which is experiencing economic difficulties in Greece and other countries.
Pollock said Canadian banks are affected indirectly by the EU crisis because some of the American banks they deal with are heavily tied to Europe.
The effect will be continued low interest rates in 2012. This is great if you’re a business looking for loans to expand, but less happy news for those who are retiring since many RSPs and bonds will be offering very little return, said Pollock. “Would you lock in for a 30-year investment at an interest rate of 2.6 per cent? This will hurt people who are living off their savings.”