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Canadian growth to keep pace with U.S. but loonie will remain weak, says RBC

by Canadian Staff   

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According to RBC Economics, Canadian GDP is expected to grow by 2.6 per cent in 2017, below the global average of 3.5 per cent but above the U.S. at 2.2 per cent

TORONTO—Canadian gross domestic product is expected to grow by 2.6 per cent in 2017 and 2.1 per cent in 2018.

This is according to the latest report by RBC Economics.

The study predicts the economy will grow at nearly double the average pace of the prior two years, due to a jump in consumer spending, business investment and government spending on infrastructure.

RBC says business investment in the first quarter of 2017 provided the biggest lift to growth since 2012, following two years of significant declines.


“Canada’s economy is on track to post its strongest gain in three years,” said Craig Wright, senior vice-president and chief economist at RBC.

Wright continued, “While we don’t discount the risk of a slowdown resulting from the pending renegotiation of NAFTA or the expected cooling of the housing market, we remain confident the economy will continue to grow at an above-potential pace for the remainder of this year.”

A Burgeoning Global Economy

While growth trends are positive in Canada, the study says the global economy will see more impressive growth; 3.5 per cent in 2017, which surpasses the 3.1 per cent growth experienced in 2016.

Election results in France and the Netherlands have lessened uncertainty concerning Europe, but according to RBC, American protectionism and Brexit negotations in the U.K. are casting a dark cloud on the sunny news.

As far as our neighbour to the south is concerned, the U.S. economy is expected to grow 2.2 per cent in 2017 and 2.3 per cent in 2018, due to wage growth and consumer spending.

The study says that despite a slight weakening, the U.S. dollar remains strong and will likely act as an impediment to robust export growth.

U.S. imports on the other hand are forecast to grow more quickly as U.S companies take advantage of the relatively strong currency to purchase imported machinery and equipment.

The strength of the Greenback is expected to be reinforced not only by continued growth but aggressive tightening by the U.S. Federal Reserve as well.

The Canadian dollar is expected to end 2017 at 71.4 U.S. cents, but RBC economics expects a brighter outlook in 2018, when the Loonie is expected to rise to 75.2 U.S. cents, as the Bank of Canada starts to raise the overnight interest rate and oil prices continue to rebound.


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