The Conference Board of Canada announced on Sept. 20 that it expects the Canadian economy to grow by 2.0 per cent in 2018. This is an increase of 0.2 percentage points from its previous forecast.
"The Canadian economy performed well in the second quarter of 2018, with consumers increasing their pace of spending, businesses raising investment in their capital stock and a double digit increase in exports," said Matthew Stewart, Director, National Forecast. "However, significant challenges remain, which will slow growth over the remainder of the year and into 2019."
The Conference Board says risks to this forecast “are substantial due to trade uncertainty. A collapse of NAFTA would likely subtract 0.5 per cent from growth.” There is also a broader risk if the U.S. and Canada increase tariffs, adds the Conference Board. “This could subtract as much as 1.3 per cent from Canada's economic growth over a two-year period, according to the Conference Board's Canadian Outlook: Autumn 2018.
Thanks to the weak loonie and a strong U.S. economy, exports are expected to rise back up to the 2 per cent range this year, forecasts the Conference Board. “However, concerns over trade negotiations, carbon taxes, and Canada's tax competitiveness are all creating an uncertain operating environment and impacting the willingness of firms to increase their capital spending.”