102
Canada Growth is projected to recover to around 2% (annualised rate) in the second half of 2019. Exports will strengthen in response to an easing in Alberta’s mandatory oil production cuts and higher export market growth. Business investment will rise as firms move to increase capacity and productivity and in response to new tax incentives. Employment growth is on course to slow, but the unemployment rate should remain near record lows. The Bank of Canada is likely to maintain the current degree of monetary stimulus, which should be sufficient to keep inflation near the mid-point of its 1-3% medium-term target band. The fiscal policy stance is set to remain broadly neutral and, with small budget deficits, the debt-to-GDP ratio should continue to edge down. Macroprudential measures have helped take the steam out of the housing market and reduced lending to high-risk borrowers. The supply of affordable housing should be increased and social housing should be better maintained and targeted. Economic growth has slowed Economic growth has slowed as households have adjusted consumption expenditure to moderating income growth and higher interest rates, and businesses have cut investment in response to greater global trade policy uncertainty. Growth has also been weighed down by a sharp fall in oil export prices in late 2018, which has reduced domestic incomes, and by mandatory oil production cuts in Alberta. In addition to these cuts, slowing import demand growth in the United States has contributed to the fall in export growth.
Canada 1 Lower terms of trade have depressed incomes
House price increases have slowed sharply
Y-o-y % changes 10
Y-o-y % changes 35
Real GDP growth Vancouver
Terms of trade variation
8 6
30
Toronto
Real gross domestic income¹ growth
Canada
25
4
20
2
0
0
0
15 10
-2
5
-4
0
-6 -8
2014
2015
2016
2017
2018
2019
2014
2015
2016
2017
2018
-5 2019
1. Real gross domestic income equals real GDP adjusted for changes in the terms of trade. Source: OECD Economic Outlook 105 database; Teranet; and Bank of Canada. StatLink 2 https://doi.org/10.1787/888933934109
OECD ECONOMIC OUTLOOK, VOLUME 2019 ISSUE 1: PRELIMINARY VERSION © OECD 2019