Slowdown, but not a recession, is looming, economist says
Deloitte chief economist Craig Alexander expects economic growth in Canada will slow to 1.6 per cent this year
— Economist Craig Alexander warned the luncheon audience that the forecast he’d be sharing might turn their stomachs.
Now, it’s not all dire. But Alexander, chief economist at Deloitte Canada, wasn’t full of positivity either.
It’s been a decade since the last recession cascaded through North America and much of Europe, and typical business cycles predict a recession every eight to 10 years.
“Most of the indicators that you see would suggest we’re late in the business cycle,” Alexander said Wednesday at the Lazaridis School of Business & Economics’ annual economic outlook event.
That doesn’t mean a recession is imminent, he cautioned, adding that he believes that stock markets have become “unduly pessimistic” and are braced for the worst. “I still think it’s going to be a slowdown, not a downturn,” he said.
Alexander believes Canadian economic growth will slow from a rate of 2.1 per cent last year to 1.6 per cent this year, and 1.3 per cent in 2020. The sustainable rate of economic growth in Canada is only about 1.7 per cent, he noted, down from about three per cent in the 1990s.
Canada is quite susceptible to what occurs south of the border, home to our largest trading partner by far. “We are plugged into a North American production supply chain.”
Last year, the U.S. saw growth close to three per cent; Alexander predicts that pace will slow to 1.3 per cent next year; the Bank of Canada forecasts U.S. growth of 1.6 per cent in 2020.
“I’m not alone in anticipating significantly slower growth in the U.S. economy, and this has an impact on Canada.”
Protectionist stances and tariffs — which could escalate heading into a presidential election in 2020 — will only serve to hurt American employment and economic growth, Alexander maintained.
In Canada, a surge in real estate and consumer spending helped to drive growth in the wake of the last recession, but those markets are cooling.
“What we need is more in the way of exports,” he said. “We really need businesses to take more advantage of the market that’s out there.”
Businesses need to ramp up investment as well, Alexander said, bemoaning a riskaverse approach that is restraining growth.
A longer-term outlook points to significantly slower economic growth with an aging population and declining workforce that won’t be offset enough by immigration, he said. Health-care costs will rise, making it difficult for governments to meet the needs of its citizens.
“We need to think a lot about competitiveness,” Alexander said. Businesses need to commercialize new innovations better. Governments should revisit tax and regulatory barriers — such as hurdles to foreign direct investment — that are impeding economic success.
“We really need to think more about how Canada’s going to compete in the future to change the path we’re on, to raise the sustainable rate of economic growth,” Alexander said.
“It’s about investing in people, it’s about investing in capital, and it’s about taking a mindset that’s more about how do we compete in the world of tomorrow.”