Global economies are recovering, but don't expect a swift return to booming growth, Canada's top chief economists said Wednesday.
"Slower, but hopefully more sustainable growth" is how CIBC's Avery Shenfeld describes it.
Most Canadian economists think the economy will grow about 2.5 per cent this year, a vast improvement from last year's 2.5-per-cent contraction. It's a far cry, however, from previous years which saw expansions of more than 3 per cent.
"For Canada, the worst is over but I don't think we can rely on a strong lift from the domestic side or the U.S. to sustain demand," said BMO's Sherry Cooper.
Economists expect consumers will be more cautious, especially on big-ticket items, than they were in previous years. Governments around the world will start to reign in spending to curb ballooning debt levels. And employers will remain cautious about hiring for months to come, they said.
"We're on the road to recovery but that road is not taking us back to where we began," said Warren Jestin of Scotiabank. He sees developed countries settling into growth trends that are "substantially lower" than in the past in the second half of this year. Developing countries, such as India, China, Chile and Brazil, will see much larger growth rates, though, while Europe and Japan will lag.
The loonie, which moved to a two-month high this week, will pass parity "in the near term" said RBC's Craig Wright amid U.S. dollar weakness and high commodity prices. The Canadian dollar is currently trading at 96.85 cents (U.S.).
More than 1,200 people showed up at the Economic Club of Canada's sold-out event, reflecting the keen level of interest in the state of the economy.
The country's chief economists were largely in accord on their views of the economy, leading TD's Don Drummond to quip, "If five of us agree on something, by definition we're going to be wrong."
He outlined several key risks facing the economy. Consumer spending could snap back more quickly than anticipated, giving a lift to near-term growth but potentially sending personal debt loads higher. Policies around banking regulation could be too stringent or uneven. On the monetary side, officials need "surgical precision" to ensure rising interest rates keep the economy in balance. And on the fiscal side, debt-to-GDP levels are set to rise.
Their views come as a new poll shows many Canadians were not hurt by the recession. Nearly 40 per cent of respondents to a Pollara poll said the downturn had no real impact on themselves or their family, while just 15 per cent said it had a major negative impact. The survey was conducted in December and is based on 4,283 responses.
More than half, or 54 per cent, think the Canadian economy will improve in the next year while just 30 per cent believe the U.S. economy will get better.
The Bank of Canada also got good grades from respondents. Two-thirds thought the central bank's views on the economy were believable, while 61 per cent trusted economists' views. Just 42 per cent thought TV and newspaper reporters were believable on the economy, though that's considerably higher than politicians, at 15 per cent.