The Canadian economy is now coming out of the recession and is poised to show some growth in the third quarter, predicts the latest forecast from RBC Economics.
RBC chief economist Craig Wright says the economy is advancing because aggressive policy actions are taking effect.
The report cites improved markets, low borrowing rates and fiscal stimulus as the keys to the turnaround. A sharp rebound in auto production and a recovery in the housing market will continue to lead the charge, the report says.
The report suggests that although the economy shrank at an average of 3.4 per cent in the second quarter, the stage is set for a return to positive growth by the third quarter. So, the bank predicts the economy will grow 2.0 per cent in the third quarter and by 2.4 per cent in the fourth quarter.
The report also projects the Canadian economy will grow by 2.6 per cent in 2010, when the 8.7 unemployment rate will also begin to fall and consumers will begin to spend again.
However, the unemployment rate is likely to remain historically high, and so inflation will probably remain below the Bank of Canada's mid-point target of two per cent.
The report concedes that there are still worries that the recovery won't last, but Wright believes that the momentum that has alread ybegun is likely to build as financial markets continue to recover and stimulus flows.
"We expect that Canada's recession will turn out to be the least severe of the past three, even after the consecutive hefty drops in GDP output from late 2008 and early 2009," Wright said.
