A panel of Canadian economists agree that 2012 should see modest growth in this country, continued low interest rates and a slightly weaker Canadian dollar. They're also calling for market volatility tied to the euro-zone, a slow recovery for the U.S. and slower, but still robust, growth for China.
The consensus is that growth will likely be about two per cent in Canada, with western provinces leading the growth.
"The western provinces are in better fiscal shape, they continue to see strong inflows of people and while commodity prices have corrected heavily in recent months, they still are relatively firm over the long-term," said Douglas Porter, deputy chief economist, BMO Capital Markets.
The Canadian dollar will likely weaken in the first half of 2012, but end the year near parity.
"The Canadian dollar: Effectively the currency is hostage to the winds of global financial markets and commodity prices no matter how wonderful our domestic fundamentals," Porter said. "If commodity prices are weakening, so too will the Canadian dollar."
The Bank of Canada will leave interests rate unchanged all year and possibly into 2013, economists predict.
Economists call for inflation to be tempered by stable oil prices and possibly lower food prices.
Oil prices will ease in 2012 by about $10 or $15 a barrel, but the drop is more likely to affect the Toronto Stock Exchange than Canada's economy, said Craig Basinger, private wealth strategist at Macquarie Private Wealth.
"You'd have to get a really material drop in price to get any change in activity in the oilsands, but we don't see it going down that low," Basinger said.
Even though buyers may save some money at the grocery store or the gas pump, consumer spending will remain sluggish because Canadians are carrying a heavy debt load and confidence is down.
On the positive side, corporate balance sheets are healthy, and there is room for corporations to support economic growth, through job creation, Kavcic said.
Job growth is critical to sustaining growth, said Paul Taylor, chief investment Officer, BMO Harris Private Banking.
"Now that stimulus is behind us, we need to see that the U.S. economy is capable of sustaining growth. The only way to do that is if corporate America puts its workers back to work, because it is only with a job that one can pay the mortgage, buy big-screen TVs or buy vacation homes in Florida," Taylor said.
Although recent numbers are more positive, a high unemployment rate has persisted in the U.S. "Companies have been reluctant to add a lot of capacity or increase their costs structures and that's hangover from 2008 when they were having trouble making payroll because their credit lines were being frozen," Basinger said.
