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Winnipeg Free Press - PRINT EDITION

Foreign threats in spotlight

Outcomes in U.S., Europe will affect Canada's performance: analysts

By: Linda Nguyen

Posted: 09/8/2012 1:00 AM | Comments: 0

TORONTO -- The country's top bank economists warn Canada needs to prepare itself for the possible fallout from economic uncertainty in the U.S., Europe and China.

"We're dealing with the hangover from the enormous amount of surplus that was provided to help stem the depth of the recession and get the economies going again," said Craig Alexander, senior vice-president and chief economist for TD Bank Group.

"And this is the dominate story -- the fiscal rebalancing in Europe and the fiscal rebalancing in the U.S.

"Don't underestimate the fiscal challenges we have in Canada. It's going to shape how economic events unfold over the next several years."

Alexander made the comments during a lunch-hour panel talk titled Insights on Canada's Economic Future. Joining him were Stefane Marion of the National Bank of Canada, Douglas Porter with BMO Capital Markets, Craig Wright from RBC and Avery Shenfeld from CIBC World Markets.

The panel agreed it remains to be seen how the instability from the U.S. election, the emerging situation with the eurozone and the economic stability of China will play out in Canada in the coming year.

It's expected Canada's economy will grow by two per cent next year, which makes China's economy one of the country's biggest financial concerns, said Alexander.

For months, analysts have predicted China's markets will experience an imminent "hard landing" or crash. If that happens, he said, it will cut Canada's expected growth to one per cent and have rippling effects across the globe.

It will also have a large impact on the U.S. -- Canada's largest trading partner.

"The indirect impact would be very significant," said Alexander.

Shenfeld said a lot of the uncertainty also comes from the results of the current U.S. presidential race.

"Politics is always a grey area," he said. "When you have... uncertainty over who's going to win the election, and more importantly, not even clarity from each of the candidates over what they're going to do, with so much hanging from the balance politically, it makes it very difficult to be too certain about the economic climate."

Shenfeld added even though Canada may not be recovering as quickly and strongly as hoped, it is still a safe place to invest.

"We could be doing better," he said.

"We'd like to be doing better but we still have enough going for us domestically that we're not going to be in dire straits, just not as happy as we'd like to be."

-- The Canadian Press

Republished from the Winnipeg Free Press print edition September 8, 2012 B17

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