OTTAWA – Canada is in for a period of weak growth that will see the country lose its cherished place as the best economic performer among big industrial nations, the OECD said Monday in a fresh assessment of global prospects.
The Organization for Economic Co-operation and Development’s latest composite leader indicator report, a forward looking assessment, projects that the data “continues to point to weak growth” in Canada, whereas it finds the recovery in the United States and Japan “firming.”
The Paris-based economic group also cites Germany, another Group of Seven nation to which Canada is compared, as ready for a pick-up in growth.
The finding is not a surprise given that Canada’s economy has been braking since last summer, with the third and fourth quarters of 2012 producing some of the slowest gross-domestic-product speeds since the recession at 0.7 and 0.6 per cent respectively.
On Friday, a group of about a dozen private sector economists told Finance Minister Jim Flaherty to expect more of the same in 2013 with real GDP growth of about 1.7 per cent.
CIBC senior economist Benjamin Tal says Canadians should get used to no longer being leader of the G7 pack in terms of growth.
“Canada is not leading anymore. Canada is entering this period in which we will underperform,” he said, explaining that the main drivers of growth so far into the recovery — consumer spending and housing — have topped out.
The Bank of Canada has counted on exports and business investment to take up the slack, but that will depend on foreign markets, particularly the U.S., becoming stronger economically.
Tal points out that the U.S. beat Canada for GDP growth last year for the first time since the 2008-09 recession, recording a 2.2 per cent advance over Canada’s 1.8.
The OECD leading indicator report does not give a specific growth figure for economies, but sees the U.S., Japan and Germany as being on the upswing, while Canada is stalled.
NDP finance critic Peggy Nash says the government should resume investing in the economy. She notes that while municipalities have been citing the infrastructure deficit in terms needed roads, bridges and public transit improvements, Ottawa is missing an opportunity to invest when interest rates are at historic lows.
“Obviously people expect us to be prudent with tax dollars, but … we’ll never find a better time and a better price to leverage federal dollars for things like infrastructure,” she said.
“Not only is lack of infrastructure hurting the economy now, but why make these investments (later) when interest rates are higher and it costs you more money?”
Flaherty told reporters last week not to expect significant new spending in the upcoming budget, expected on March 26, adding that his focus remains on balancing the budget in 2015-16. For that, he may need to trim spending and close tax loopholes, he said.
The economists who advised the minister agreed the economy is not sufficiently weak to require more stimulus, although at least one said Flaherty should be careful not to cut too deeply.
Tal noted that Canada’s economy, although about to lag some others in growth, remains relatively healthy when stacked against its G7 rivals.
Canada’s superior performance the past four years means the economy has already recovered all the losses in output and jobs lost during the slump — and more — while many others remain in catch-up mode.
The U.S. still has not recouped all the jobs it lost in the slump, for instance, while Canada has not only done so, but added more 500,000 workers on top of that level. In terms of economic output, several large European countries, notably Italy and Spain, remain mired in recession.
“Those leading indicators tell you where you are going, they don’t tell you the level you are at,” he explained. “We’re operating at a relatively high level, while the U.S. and other places, they are operating at very low levels.”