The Canadian economy will shrink by 2.4 per cent this year but will start to show signs of a "moderate recovery" in 2010, the Royal Bank of Canada said Monday.
Craig Wright, senior vice-president and chief economist at RBC, said the worst of the global recession has passed.
"Although Canada's economy slumped in early 2009 and will likely remain in recession this second quarter, we believe it is ripe to enter its recovery phase later this year," Wright said in a press release Monday.
"Improving global growth prospects, alongside extraordinarily low interest rates and government stimulus, are expected to allow Canada to return to positive growth in 2009, with a moderate recovery in 2010."
Still, Canada's economy will contract this year, due in part to the substantial 5.4 per cent annualized contraction of the real GDP in the first quarter.
Although wage growth was "unexpectedly firm," the report said incomes were still affected by a sharp decline in hours worked.
This created "further financial pressure to bear on consumers already coping with elevated debt levels and diminishing asset values."
The report also said consumer confidence will continue to be "constrained" by increasing job losses.
RBC also said Newfoundland will lead all the provinces in growth in 2010. Meanwhile, Ontario and Prince Edward Island will have the slowest growth.
In the U.S., the American economy could see a "moderate turnaround" by the second half of this year.
"The benefits of significant fiscal and monetary policy stimulus are starting to have traction," Wright noted.
"There is an unprecedented amount of money bolstering the world economy. What we will be watching is the impact this spending has on labour markets, as well as household and business confidence. The degree of impact will be a crucial factor in shaping economic recovery."
