In 2012 the Canadian dollar is predicted to stay just below par and Canadian GDP will grow just two percent, according to Doug Porter, Deputy Chief Economist at
BMO Capital Market, who released his 2012 predictions on Boxing Day.
“Despite Canada’s many inherent advantages, the loonie dipped against most other major currencies (including the euro) in 2011. We look for the Canadian dollar to remain a bit below parity in the coming year, held back by an uncertain and softer global economic backdrop,” writes Porter.
Canada’s economy will be held back due to government fiscal restraint.
“We have recently nudged up our Canadian GDP growth outlook for next year to 2 per cent, but this is a bit below both this year’s result (2.3 per cent) and the U.S. forecast for next year. We will see fiscal policy shift more notably to restraint from about neutral in 2011, with both the federal and many provincial governments leaning more heavily on the brakes.”
Andrew Busch, Global Currency and Public Policy Strategist at BMO, believes that Europe will be a drag on growth. European GDP will be negative for the first half of the year as the continent grapples with the debt crisis.
China is still an unknown at this time.
“There is the question of whether the Chinese will begin to ease back from the tightening of monetary and regulatory measures. We are just beginning to see consumer inflation easing; housing prices will also need to soften before more aggressive easing can occur,” writes Busch
