Another big Canadian bank is predicting weak growth for the Canadian economy next year as the country is squeezed by a weak job market, worldwide recession fears and record consumer debt.
In a report Thursday, Scotiabank predicted Canadian growth of below 2% in 2012, though oil and gas megaprojects and public infrastructure investment will help some parts of the economy.
However, household spending gains will be dampened by weak job creation and rising consumer debt, now at record levels.
The looming cuts in the United States and euro-zone countries will dampen worldwide growth and also point to ongoing volatility in currency, stock and bond markets, the bank said in its 2012-2013 economic and market outlook.
The United States economy will also produce slow growth in 2012 -- struggling to reach 2% -- on weaker household spending and a sluggish recovery in the jobs market.
"Financial markets have been buffeted in recent months by heightened investor anxiety over prospects for global growth, the sovereign debt crisis in Europe and the limited progress in bringing Washington's massive fiscal deficit under control," Scotiabank Chief Economist Warren Jestin said in a release.
"For debt- and deficit-heavy nations, the magnitude of the structural adjustments required for meaningful fiscal repair will dampen growth through mid-decade. While some European nations will eke out gains, overall growth in 2012 will be non-existent in the euro-zone as public sector retrenchment and private deleveraging push a number of distressed economies into -- or deeper into -- recession."
The Scotiabank estimates are similar to a report from TD Bank released Wednesday, which saw the bank downgrade its economic growth expectations to 1.7% next year.
Meanwhile, the Bank of Montreal predicted Thursday the Canadian economy will grow 2% in 2012, down from 2.3% this year.
Despite continued low borrowing costs, expected budget cuts in Ottawa and the provinces to rein in government deficits will dampen growth prospects, the bank said.
The November jobless rate of 7.4% is expected to rise, possibly as high as 8%, in 2012 if the economy slumps even more than expected.
