June 25, 2013
Ontario 's economy stuck in lower gear until 2015, Central 1 Credit Union forecasts
TORONTO - Ontario's economy will limp along this year and next before gaining momentum in 2015 through to 2017, says the latest forecast by Central 1 Credit Union's chief economist Helmut Pastrick. Real Gross Domestic Product (GDP) growth will average 3.1 per cent annually in 2015-17, up from an anticipated 1.4 per cent in 2013 and 1.9 per cent in 2014.
"The continued weakness in 2013 is due to tepid domestic demand," Pastrick said. "Growth in the United States will gradually boost Ontario's prospects in coming years."
Highlights of the forecast for 2013-2017 include:
- slowdown ends this year, economy to gain momentum in 2014;
- U.S. economy boosts Ontario's exports with assistance from a lower loonie;
- house prices and sales will increase after 2014 following the mild downturn currently underway;
- business investment will drive growth as governments continue to cut spending to deal with deficits;
- unemployment will remain high until 2017 when it will decline below six per cent.
Since the last forecast, Ontario's economic growth for 2013 and 2014 has been downgraded in tandem with forecasts for Canada and the global economy. Real GDP growth in 2013 was previously forecast at 1.9 per cent and is now 1.4 per cent, while 2014 was forecast at 2.2 per cent and is 1.9 per cent in this report.
"Interest rates will remain low and rise moderately later in the five-year forecast to near-normal levels in 2017," Pastrick said. "The first Bank of Canada rate increase is expected later in 2014 or early 2015 when rates will start to rise slowly, approaching normal levels in 2017."
Higher corporate profits are forecast in 2014 and 2015 following weak growth in 2012 and 2013. Much of the expected increase will come from higher export prices in domestic currency and from ongoing productivity improvements through investment and labour saving processes.
The underlying inflation rate will not rise until the economy is operating with little or no excess capacity, a condition not expected until after 2017.