As we come to the end of 2011, many economists are releasing their predictions for 2012, including those from Desjardins Group. While they don't paint a completely rosy global economic picture, there is some good news for Canada.
The Desjardins economists predict continued instability around the world:
• The European economic and financial environment remains very strained.
Japan's economy remains fragile and vulnerable to a slowdown by global demand and the strong yen.
• The slump in the U.S. is lasting longer than forecast and the main risk is that the Americans could relapse into recession, pulling Canada along in the wake; however, Canada would likely do better in a recession, provided that commodity prices don't fall. Canada also has a more flexible monetary and fiscal policy, and a healthier domestic demand.
How does Canada fare?
• Canada's prosperity depends on trade with United States, European and Japanese economies, but their instability makes us vulnerable.
• Nevertheless, Canada's expected growth in 2012 is 2.1% compared to 2.3% in 2011.
• Our sound budgetary situation would give the federal government the leeway to announce an additional series of measures to significantly support growth if we do in fact face another recession.
• The Bank of Canada could maintain its overnight rate and commit to keeping it low for a given period, as it did in 2009; key interest rates will stay where they are until at least mid-2013.
What does this mean for the average Canadian?
Our public and private debt is too high, which adds to our vulnerability. We have to do a better job of paying off the old debt and avoiding new debt.
How can we achieve this?
• Watch where your money goes: Look over your budget line by line. Figure out if there are areas that you can cut and then apply this money to your debt.
• Pay off the old and don't add any new: Set up a pre-authorized payment program every payday to force yourself to save and pay down your debt.
• Avoid impulse buying: Before you shop, take a quick inventory of what you have and what you'll need. Then make a list and stick to it. Most importantly, pay for your items with cash only.
• Create a savings plan for large purchases: Do you want to take a trip? Or buy that new 3-D TV? Having a savings plan for a special purchase is the best way of avoiding additional debt. You may find that delaying gratification and working towards this savings goal is a lot of fun -- it will certainly make your wallet happier.
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