TORONTO—Despite recent threats to the world economy, the risk of falling back into recession is still small, according to a new report from CIBC World Markets.
The report forecasts that Canada’s real GDP will grow four per cent in the first quarter of 2011.
CIBC senior economist Peter Buchanan says despite concerns about the impact of rising gas prices on U.S. spending, oil would have to reach $160 a barrel to derail the recovery.
He says modestly strong oil prices are also best for the Canadian economy, although it could start to negatively impact Canada during following quarters in areas such as auto sales.
Canada could also feel the brunt of the appreciating loonie —and its impact on the country’s non-energy exports.
Meanwhile, global governments, especially in the U.S., are tightening spending.
In light of oil price hikes and government cutbacks, CIBC’s forecast for 2011 U.S. GDP growth dropped a tenth of a point to 2.7 per cent.
The report said emerging markets could also dampen global growth as they increase restraint measures to tackle inflation.
“That will cool performance in what, to this point, have been some of the world’s hottest performers. While those economies are unlikely to sink into recession, growth simply won’t surprise to the upside the way it has in recent years,” the report said.
It predicts a Bank of Canada rate hike in May.
The Conference Board of Canada, in a seperate report also released today, said Canada gained fiscal ground on its international peers during the recession, but has started to slip towards the middle of the pack.