Canada’s Economic Growth To Slow In 2018 To 2% Annual Pace: Economists

Several economists polled by the media said that they expect the Canadian economy to slow this year to an annual pace of about 2% growth.

Several economists surveyed by CBC News said that the Canadian economy is now running at or near its peak capacity and likely to cool as we progress through 2018. They then expect economic growth to fall below 2% in 2019. This contradicts the more optimistic forecast of the Bank of Canada, which sees the country’s Gross Domestic Product growing at 2.5% for 2018.

"Canadian growth probably peaked in 2017 and will moderate into next year, but this is more about going from a sprint to a marathon-like pace than coming to a full stop," said Frances Donald, Senior Economist at Manulife Asset Management.

Economists say that 2% growth is still healthy for a country the size of Canada because it's above the potential growth rate — the level of output an economy can produce at a constant rate of inflation. However, a growing list of uncertainties that includes the rise of the minimum wage in Ontario and Alberta, new mortgage rules, NAFTA negotiations and the impact of three recent interest rate hikes could put the brakes on Canada`s economic growth, say the economists.

"At this point, we've got two more rate hikes pencilled in the second half of the year, but we'll see what happens with NAFTA," said Douglas Porter, Chief Economist at BMO Financial Group.

While Canada's growth is expected to decelerate, experts are less united on whether the rest of the world will follow. Last week, the International Monetary Fund (IMF) raised its global growth forecast for 2018 and 2019 to 3.9%, up 0.2 of a percentage point from its estimate last October. The IMF said sweeping tax cuts in the U.S. are likely to boost investment in the world's largest economy and help its main trading partners.

But Mr. Porter said Canada will only get a ``little benefit`` from tax reforms in the U.S., because it's still mostly a U.S. story. The IMF expects the U.S. to grow by 2.7% this year, up from 2.3% in 2017.