The Commerce Times

Top economists predict a slow but sustainable growth in 2010

Chief economists from Canada’s top five banks assembled at the Sheraton Centre for the Economic Club of Canada’s annual Outlook event. Speaking to a huge crowd of approximately 1,200 people at the Sheraton Centre Toronto Hotel, all of them agreed that while the worst is behind us, consumers would continue to proceed with caution.

The Canadian economy would only see a slow growth at around 2½ per cent in the year 2010. They also noted that governments around the world must be careful in carving out their exit strategy from the private sector. Here is what they had to say:

Sherry Cooper, Chief Economist, BMO Capital Markets

“The regional banks (in the U.S.)in particular are still exposed to the commercial real estate problems. In many parts of the United States, housing continues to be a net negative factor. Despite all this, personal income growth in the U.S. will be much stronger in 2010 than in 2009. Business investment in software equipment is picking up, but the big improvement is coming from an inventory rebuilding. I expect the employment market to improve. 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. Modest economic recovery and sub-par is likely.”

Warren Justin, Chief Economist, Scotiabank

“In the second half of the year, the developed world – Canada, the U.S., Europe and Japan will be settling into a growth trend that will be substantially slower than being thought to be normal in the past. The global economy is on the road to recovery
but that road is definitely not taking us back to where we were when the recession began.”

Craig Wright, Chief Economist, RBC Financial Markets

“For the last five months, we’ve had gains, consumers have jobs, they have income, they have confidence and continue to spend … But when it comes to exit strategies (of government stimulus) and when to raise interest rates and rein in fiscal policy, I think policy-makers, given the choice of going too early and causing a double dip or going too late and running the inflation risk, will run the inflation risk.”

Avery Shenfeld, Chief Economist, CIBC World Markets

“Looking ahead, things don’t look quite as rich as they would have been had you bought stocks at the end of December 1999. The economy will probably be better at the start of the year than it will be towards the end. I guess you can say this isn’t the time that Charles Dickens wrote about, it’s not the best times, but it’s not the worst times either. ”

Don Drummond, Chief Economist, TD Bank Financial Group

“One of the lessons (of the economic crisis) was the resilience of the financial sector. Let’s face it, these banks in other countries built an atomic bomb and blew it up in their building. Some of them disappeared from it, but the system is still standing and it is still lending. If you look at the largest economies their average debt-to-GDP ratios are well over 100 per cent. In Canada, ours will go up from about 25 per cent to 35 per cent, but we are nothing compared to most other countries where debt is going to be tough to get out of. ”