Although Canada experienced a deep recession for most of 2009, the country is now expected to lead the G7 in economic recovery next year, according to a report released Monday by RBC Economics.
The report stated that after contracting at an average rate of 2.5% this year, real GDP is expected to rise by 2.6% in 2010 as stimulus spending reaches its peak. GDP is expected to jump to 3.9% in 2011, it said.
"While challenges remain, a peak in stimulus and infrastructure spending across the federal, provincial and municipal governments, along with low interest rates, should result in a sustained recovery," said Craig Wright, senior vice-president and chief economist at RBC.
"The price tag for the stimulus is high with large budget deficits, but it is still lower, relative to GDP, than the peaks reached in the early 1990s."
With interest rates low and confidence improving, consumer spending is projected to increase by 2.3% in 2010 and by 2.7% in 2011. However, the report also indicated the unemployment rate is expected to remain high at 8.7% in 2010 and fall to 7.8% in 2011.
On Friday, Finance Minister Jim Flaherty told reporters in Quebec City the federal government’s multi-billion-dollar stimulus package is just starting to gather speed now as environmental assessments for infrastructure projects are completed.
Earlier this month, Statistics Canada said the economy grew at an annual rate of 0.4% in the third quarter, marking the official end of recession. However, the growth was far lower than the 1% economists had forecast and the 2% predicted by the Bank of Canada.
