OTTAWA — Canada is leaving the dark days of the recession behind and is poised to move forward with moderately strong and steady growth over the next two years, the Conference Board says.
The forecast in the Ottawa-based think-tank’s fall paper largely dismisses fears of a so-called “double-dip” slump that some analysts believe could arise as governments withdraw stimulus after next year.
While the report credits massive public-sector spending and historically low interest rates for much of the current turnaround, economist Pedro Antunes said he already sees the beginning of a private-sector revival.
Antunes said he doesn’t believe in the double-tip theory.
“We believe once we get into 2010 and 2011, we start seeing the private sector coming back. We think (the stimulus) will bridge the gap.“
Stimulus dollars, particularly infrastructure spending, have been slow to roll out, he said, and that may turn out to be a blessing in disguise because government-fuelled growth will be a major factor in the recovery next year as well.
The Conference Board forecasts Canada’s growth will rebound to 2.9 per cent next year and 3.6 per cent in 2011, a slightly rosier estimate than the private sector consensus, but in line with the Bank of Canada’s last published projections.
At a news conference in Toronto, Prime Minister Stephen Harper appeared to agree with Antunes that it is still too early to start withdrawing public sector stimulus spending.
”Globally, the recovery remains fragile,“ Harper said. ”We need to be optimistic but cautiously optimistic and making sure that all governments don’t take the foot off the gas in terms of delivering needed stimulus measures.“
Antunes concedes if a double-dip were to occur, it would likely happen in 2011 and in the United States, where the private sector is still laying off hundreds of thousands of workers a month and where the withdrawal of stimulus, such as the Troubled Asset Relief Program, will have a more profound braking impact.
Hence, the Conference Board believes Canada will outperform the U.S. over the next two years.
The U.S. economy is still being hobbled by rising joblessness, solvency fears in commercial real estate, high household debt and that fact that while financial markets have stabilized, lending to businesses is still contracting. It won’t be until 2011 that the U.S. consumer will be in position to re-engage, the report says.
By contrast, Canada has reported two job creation months in a row and consumer confidence is growing.
Still, the underlying theme of the report is that the recession has ended in both countries and is unlikely to return.
”The darkest days now seem to be in the past,“ the report states.